



0^ , 













/.c:^/''°o 






5^4 





^^-^^^ 



HO^ 



O. %► 








» %.^'' •* 















'^7tv>* ^0^ V'^iT.-'- ^^' 






O 4 



*o 





















3^r 




* ^' '^^ ^Mi^: A^ ^. 



^^ 











«^ • 







.<? «3^^ 



• * • *n 



•^ov*' f'-^a'-. '^^o«' :^^^'- -^ov* • 

















."5 >_ *. 













.' .5.'^'^^. 







BUSINESS AND EDUCATION 



BUSINESS AND 
EDUCATION 



FRANK A. VANDERLIP 

Vrm- Presidentj National City Bank, Ne^w York 




NEW YORK 

DUFFIELD AND COMPANY 

1907 



rUBRARY of congress! 
j Two Cooles Rec«fv«l 1 

WAY 6 1907 
* Copyright Entry 

CLASS dA^XXd, Nrf. 



copyr-ight, 1907 
By Duffield and Company 



Published May, 1907 



THE UNIVERSITY PRESS, CAMBRIDGE, U. S. A. 



TO 

MY MOTHER 



CONTENTS 

PAGE 

The Co-ordination of Higher Education i 

A New College Degree 20 

The Young Man's Future 42 

Trade Schools and Labor Unions ... 56 

The Business Man's Reading 82 

The American Invasion of Europe . . 94 

The Industrial Future 205 

Old- Age Pensions for Workingmen . . 224 
America's Foreign Commerce . . . . 253 
The Ultimate Dependence of New Eng- 
land UPON Foreign Trade 277 

Political Problems of Europe as they 

Interest Americans 297 

The Currency 479 

Banking Developments . 494 

The Lessons of our War Loan . . . . 509 

The Treasury 529 



Business and Education 



CO-ORDINATION OF HIGHER 
EDUCATION 

Founder's day address, delivered at Girard College, 
Philadelphia, May 20, 1905. 

It has been well said that when Stephen 
Girard conceived this notable institution, the 
benefaction was more than a philanthropy, 
— it was a precedent. He was the first man 
of great wealth to devote a vast fortune to 
an educational idea. We cannot measure 
the influence that act had. The example 
may have been of as great good in its effect 
upon the minds of other men of wealth, as 
has been the value of the greaj; benefaction 
^itselfV Certain it is that the precedent then 
made was the beginning of a long and ever- 
increasing list of educational gifts. That 
list has come to be of such proportions that 
to-day the giving of a million dollars to an 
institution of learning excites little more 
than the passing comment of the hour. 

In the gift of Stephen Girard there was 
a special significance. It was not a gift of 
money alone ; there was added to the money 



Business and Education 

wise judgment, a nobler motive, and a care- 
fully considered plan. Girard gave his 
brain, the ripe wisdom of his experience, and 
the broad and helpful charity which years 
of struggle and sorrow and loneliness had 
left in his heart. With his money he also 
gave himself. 

In the long line of educational benefactors 
who have come after him, can there be found 
one who has done more? Is there one who 
has more completely vivified his gift with 
his own thought, his own personality? It is 
to the value of that particular phase of 
Girard's giving, the value of the example 
which he set in the giving of his own ripe 
judgment, as well as of his money, that I 
would especially direct your attention. 

Learned men are to-day almost as far 
from Agreement as to what constitutes the 
best education as they were when Aristotle 
first protested against current beliefs on the 
subject, "All *the centuries of debate and of 
experiment from the days of the Greek phi- * 
losophers to the latest meeting of our own 
educators, have resulted in progress, but 
certainly not in agreement as to what is edu- 
cation and as to just how it should best be 
acquired. (Probably the nature of the prob- 
lem is such that a definite solution never can 
be reached? We can hardly expect an an- 
swer which will be accepted by all learned 



Higher Education 

men. I am inclined to believe that one 
reason why we have never approached 
nearer to agreement, however, is because 
the solution of the problem has been left 
too largely in the hands of professional 
educators. 

Even though men bear learned degrees 
and have shown rare ability in acquiring a 
special sort of knowledge prescribed by a 
particular system of education, it may not 
follow that those same learned men are the 
best judges of what should be the trend of 
that educational system. If they alone are 
left to shape the further development of that 
system, I believe its growth would be less 
likely in all respects to follow the best lines 
than would be the case if its development 
were in a measure shaped by men who have 
acquired another form of education and 
have scored success in other fields. The 
professional educator is quite as likely to 
become narrow and provincial as is any 
other specialist. The president of one of 
our great eastern universities told me a few 
days ago that he had been making an exhaus- 
tive examination of the history of his insti- 
tution and he had discovered that every 
great progressive step which the university 
had taken in one hundred and fifty years had 
been against the protest and the opposition 
of the faculty. The trustees from time to 



Business and Education 

time brought forward new plans of organi- 
zation and broader ideas regarding the cur- 
riculum. The faculty had in every case 
voted adversely, and when the changes were 
made, they were made only by the trustees 
taking the responsibility upon themselves. 
Even Alexander Hamilton, with his consum- 
mate wisdom, once worked out a plan of 
reorganization for the university, only to 
have it meet with the usual vote of emphatic 
protest from the faculty, but final adoption 
by the trustees. Now, in the light of years 
of experience, these changes are seen to have 
been wise in the main. The unavailing pro- 
tests of the learned men who made up the 
institution's faculty are discovered to have 
sometimes been based on narrow grounds 
lacking the impersonal view and judgment 
that should have been brought to bear upon 
the questions. 

This is only one illustration of many that 
might be given of the tendency toward nar- 
rowness on the part of the specialist, of the 
wisdom there is in larger counsels, and of 
the value to educational progress that may 
come with the judgment and experience of 
men of large affairs and wide interests. 
Schools are for the education of all sorts of 
men, and in directing their development 
there is need of almost as many points of 
view and of as varied experiences as there 



Higher Education 

are classes of men to be educated. It is 
easily possible for men engaged in the par- 
ticular work of education to become narrow. 
Book covers contain much knowledge, but 
may also shut out from a too close student 
much wisdom, — much of that sort of wis- 
dom which is gained by experience in the 
world. And so, I believe that when the 
example was set to men of wealth, of giving 
with their money their thought, their ex- 
perience, their judgment, that example was 
of great value. 

Keen foresight, a shrewd knowledge of 
humanity, a wise and well-seasoned judg- 
ment of the practical value of things, ordi- 
narily go to make up the mental equipment 
of the man who has made a million dollars 
which he is ready to devote to some great 
public good. If the example which Girard 
set in any measure leads such men fully to 
use that same wisdom and judgment which 
enabled them to make the million dollars, in 
helpfully directing along right lines the 
manner of its spending, then the example is 
of value indeed. The worth of a man's ben- 
efaction may be vastly increased if, to direct- 
ing the influences which the gift will set in 
motion, he will give anything like the thought 
which he gave first to the acquisition of the 
money. The gift which is vitalized by the 
sound judgment of the giver may become 

5 



Business and Education 

more valuable because of its aim than be- 
cause of its amount. 

There has been much generous giving 
without clear thinking. There has been 
much philanthropy the effectiveness of which 
has been small because there was lack of 
wisdom in directing its use. That leads me 
then to one thought which I wish to present 
in connection with my subject, and that 
thought is in reference to the tendency 
toAvard waste. The keynote of economic life 
to-day may be said to be the prevention of 
waste. The pervading economic tendency 
of the day. the tendency toward combination 
and away from useless competition, is a ten- 
dency which has been set in motion as a pro- 
test against waste. It is, I believe, in its 
potentiality for the improvement of the con- 
dition of men among the foremost of all 
economic influences ever brought into being. 

Xot a great deal of thought has been 
devoted to the idea of waste in education. 
We have a feeling that all education is good, 
and whether or not this or that particular 
educational activity is of the greatest possible 
efficiency, Ave still think that it is at least of 
value and is Avorthy of encouragement. 
This loose commendation of all forms of 
education tends to blind eyes to an educa- 
tional Avaste, though they Avould Avith clear- 
ness see an economic Avaste. It is true too 
6 



Higher Education 

that the disadvantages of educational waste 
are not so clearly discernible as are the dis- 
advantages of economic waste, though the 
results may be no less deplorable. 

Since the precedent of the great Girard 
benefaction was established there has fol- 
lowed a golden flood of gifts for educational 
purposes and in the main the giving has been 
without discrimination. It has been as if 
Education were a definite and complete con- 
ception, and as if a benefaction laid at Edu- 
cation's shrine, no matter where that shrine 
might be erected or in whose keeping it 
might be, was a gift given with rare discrim- 
ination and with the certainty that it would 
be wisely devoted to the noblest uses. Unfor- 
tunately that has not always been the case. 
Educational donations are frequently, I may 
almost say usually, made with a lack of per- 
spective as to what would be best for the 
whole educational field. The giver or the 
recipient may be moved by an ambition to 
satisfy local or personal pride. Rarely have 
men made their gifts in such form as would 
be to the greatest advantage to the proper 
development of the whole system of higher 
education. They have not clearly seen how 
much the system was lacking in co-ordina- 
tion of effort, how wasteful it was becom- 
ing in unnecessary duplication, how need- 
lessly costly it was being made by useless 



Business and Education 

and hurtful competition — not competition 
in the field of merit, but in the field of narrow 
personal or local ambition. 

There has been a lack of co-ordination in 
the field of higher education. We have failed 
to evolve a strong central purpose which 
would serve to give symmetry to educational 
development. The lack of a central influ- 
ence, an influence which would hold back 
growth here and encourage it there, has cost 
much in wasted effort and in unsymmetrical 
growth and development. 

If the Stephen Girards of to-day, men of 
clear thinking, of high purpose, of wise 
judgment, would give the best that is in them 
of wisdom and advice to aid the educators 
in creating wisely such a central purpose, the 
gift which they would thus make would be 
of greater value than would be their gifts 
of millions. 

Just what they should advise I am, of 
course neither prepared nor competent to say. 
I wish only to assert confidence in the great 
benefit to the whole movement of higher 
education which would come from the advice 
such men could give, would they but study 
the problem with the care with which they 
study the large affairs of business. There is, 
however, a hint for a plan of effective action, 
it seems to me, in the two vast benefactions 
which have been made by the great philan- 
8 



Higher Education 

thropist of our present day. In the ten- 
million-dollar fund which created the Car- 
negie Institution there was the idea of a 
benefaction which should be devoted to the 
advancement of human knowledge wherever 
the opportunity could be found. It was not 
the purpose to build up an additional insti- 
tution of higher learning, to duplicate the 
work and compete with the efforts of an 
already ample number of such institutions, 
but rather to lend aid wherever aid was most 
needed for the advancement of human 
knowledge. In a more recent benefaction 
a like vast sum has been given for the useful 
purpose of retiring faculty members who 
have passed their day of usefulness and who, 
in the interest of highest efficiency, had best 
make way for others. The benefits of this 
latest foundation are intended to apply to the 
entire body of institutions of higher learning 
with certain obviously appropriate excep- 
tions. 

Is there not in these two benefactions a 
hint of what might be done in the way of a 
movement of great importance towards uni- 
fying and co-ordinating our whole system 
of higher education, a movement which 
would tend to decrease a waste of expendi- 
ture and of effort? It hardly needs demon- 
stration, I think, that there is such waste. 
There is a wast^ of educational endowments 

9 



Business and Education 

and of instructors' efforts as well as of the 
meagre funds and invaluable time of the 
youths whose college years are being made 
less fruitful than would be the case had we 
reached the point of highest possible effi- 
ciency in each educational institution. 

I believe there might be created a great 
central fund, the object of which should be 
so to distribute the income as to give effec- 
tive force to an impulse toward co-ordination 
of our wdiole system of higher education. If 
such a fund were in the hands of the wisest 
body of men that could be brought together 
for that purpose, it could be so used that 
it would stimulate the educational system to 
a symmetrical growth. It could be so ad- 
ministered that it would encourage that 
growth which ought to be encouraged in the 
judgment of men who were looking at the 
whole field. It would avoid the mistake of 
helping institutions to undertake work that 
was not demanded and for which they were 
not fitted. It would give great encourage- 
ment to the small colleges, but it would be 
encouragement leading them to do the best 
possible Avork in their own particular field, 
and not stimulating them into attempts to 
become universities that undertook to accom- 
plish impossible things. On the other hand, 
it would give encouragement to great univer- 
sities to broaden and strengthen their ca- 

lO 



Higher Education 

pacity to do true university work, and it 
would discourage the efforts of such of those 
institutions as may have forgotten that num- 
bers alone do not make great seats of learn- 
ing. It would put emphasis on the error of 
those institutions that have lowered their 
standards and admitted to their privileges a 
mass of illy prepared youths, who, from 
every point of view, might have better spent 
some time at a smaller institution where in- 
dividual needs could have been looked after 
more efficiently and effectively. 

I would provide for the administration of 
such a fund a board of trustees that had 
large educational experience and outlook, 
and I would also have among those trustees 
men of broad experience in affairs of im- 
portance and in the practical matters which 
concern the average man. Such a fund so 
administered would put a mighty impress 
on the whole development of higher educa- 
tion. It might make an impress which would 
be out of all proportion in importance to the 
effect which the same fund would have had 
if, in the first instance, it had been divided 
among many institutions. 

I believe if some present day Girard will 
make the beginning with such a fund, giving 
with his benefaction his wisdom, his experi- 
ence and his judgment, so that the fund 
really becomes an instrument such as I have 
II 



Business and Education 

described, he will have rendered a service, 
the value of Avhich Avill be beyond measure ; 
he will have created an instrument which will 
check waste ; he will have helped men to see 
that the highest possible success for an in- 
stitution of learning is to become a perfectly 
efficient unit in a perfectly co-ordinated 
scheme ; he will have made men understand 
that the unit which forms one part in such 
a system is as creditable as another, that the 
small college can be made to do as valuable 
work as the great university, providing each 
institution fulfils its special purpose in a 
symmetrical whole. 

Since the day when Stephen Girard drew 
the will Avhich made this institution possible. 
there have come alterations in the scope and 
method of educational work which have been 
fundamental and far-reaching. The seventy- 
five years which have elapsed since that in- 
strument was written have worked vast 
change and progress in every department of 
life, and in none, perhaps, more than in the 
field of education. The world's conception 
of a university has been revised within that 
period, the scope of the curricula has been 
broadened so as to take in fields of knowl- 
edge that were not thought, by Stephen Gir- 
ard's contemporaries, susceptible of scien- 
tific classification. These curricula have now 
long contained subjects which then no one 

12 



Higher Education 

supposed would ever form a part of college 
training. 

We have gained, too, new and greatly 
improved conceptions of how old subjects 
should be taught. In the entertaining auto- 
biography which that most useful citizen, 
Andrew D. White, has recently given to the 
world, an interesting picture is presented of 
the shortcomings of American universities at 
a period even a generation after Girard's 
death. The university world then was a 
world of dry text-book recitations, lacking 
the method and treatment that give subjects 
a living interest. There was not at that time 
in an American university a professor of his- 
tory, pure and simple. It was not until Mr. 
White had organized Cornell University, 
and at as late a day as 1870, that there was 
in any American university a course of lec- 
tures on American history. An American 
student, in order to secure instruction in the 
history of his country, had, before that time, 
to go to the lectures of Laboulaye at the 
College of France. 

It is within the period since Girard's death 
that an entire department of learning has 
been recognized and created — the depart- 
ment of higher technical education. At first 
the idea of that sort of education was scouted 
by the universities, while its value failed of 
appreciation at the hands of practical men. 

13 



Business and Education 

A man need not have lived more than the 
allotted span to remember the scant regard 
in which higher technical education was held. 
Practical men pronounced it impractical; 
learned men regarded its atmosphere, spirit, 
and scope as something putting it quite out- 
side of the recognized field of higher educa- 
tion. There has been a long step from the 
attitude of those early days to the present 
when we find, even in the strongholds of the 
ultra-conservative university life of Ger- 
many, a recognition of technical training 
which places it on a level with the other 
learned professions, or when at home we find 
even intellectually aristocratic Harvard in- 
viting, perhaps vainly, a great technical 
school to share in its endowments and enjoy 
the lustre of its honored name. 

I have referred to some of these evidences 
of change and of progress in our views re- 
garding higher education, because I believe 
that we are even now in the midst of as im- 
portant changes and as great progress as in 
those years gone by. The tendency is to 
make education more practical. We are 
coming more clearly to recognize that for 
the many kinds of men there must be many 
kinds of education. In those early days the 
engineers who grew up in a school of experi- 
ence looked with doubt and disfavor for a 
time upon the man who, by some short cut 



Higher Education 

of learning, was attempting to reach a goal 
ahead of those who were following the or- 
dinary road. So the business man to-day is 
inclined to look with doubt upon any sug- 
gestion that it is possible to have a higher 
commercial education which will be of prac- 
tical value. Just as the educators of two 
generations ago felt that there was no proper 
place in the sacred grove of learning for a 
branch of education that smacks so of every- 
day life as did a course of engineering, so 
to-day there are many who believe that an 
attempt to teach the principles of commerce 
would be bringing into the classical concep- 
tion of education a subject that has no place 
there. 

The mental equipment of a business man 
needs to be greater to-day than was ever 
before necessary. Just as the sphere of a 
business man's actions has broadened with 
the advent of rapid transportation, tele- 
graphs, cables, and telephones, so have the 
needs of a broad understanding of sound 
principles increased. It was steam proc- 
esses of transportation and production that 
really made technical education necessary. 
The electric dynamo created the demand 
for technically educated electrical engineers. 
So the railroad, the fast steamship, the elec- 
tric current in the telephone and cable, and 
the great economic fact of gigantic and far- 

15 



Business and Education 

reaching business combinations, are making 
the science of business a different thing from 
any conception of commerce which could 
have been had when Girard was the most 
successful of American business men. The 
enlarged scope of business is demanding 
better trained men — men ^vho understand 
principles. New forces have made possible 
large scale production, and we need men 
who can comprehend the relation of that 
production to the world's markets. There 
has been introduced such complexity into 
modern business, and such a high degree of 
specialization, that the young man who be- 
gins without the foundation of an exceptional 
training is in danger of remaining a mere 
clerk or bookkeeper. Commercial and in- 
dustrial affairs are conducted on so large a 
scale that the neophyte has little chance to 
learn broadly either by observation or by 
experience. He is put at a single task. The 
more expert he becomes at it, the more likely 
it is that he will be kept at it unless he has 
had a training in his youth which has fitted 
him to comprehend in some measure the re- 
lation of his task to those which others are 
doing. 

It is true that the practical value of tech- 
nical education is more obvious than is the 
value of a higher commercial education. A 
man cannot build a railroad bridge unless 
i6 



Higher Education 

he is an engineer. Schools can teach en- 
gineering, and the value of the technical 
school is therefore clear. It is less easy to 
establish the certain value of a higher com- 
mercial education, but, for my own part, I 
believe that that value will in time come to 
be as fully recognized. We have seen in 
Germany an example of distinct success of 
this sort of training. One is beginning to 
find all over the world positions in business 
houses filled by Germans who have been se- 
lected because of the superior training they 
have received in the German schools. 

If the people of the United States are to 
make the most of their opportunities, they 
must employ the most effective methods. In 
a university course of higher commercial 
training much can be taught that will be of 
national value in the development of these 
opportunities. These schools of commerce, 
it seems to me, should be attached to univer- 
sities. The training they offer should be in 
addition to the general university training. 
I believe there is a trend in educational de- 
velopment to-day that is in that direction, 
and that the results which will follow such 
a development will be of enormous value. 

The men who have administered Girard 
College have had occasion to note an inter- 
esting change in an important phase of in- 
dustrial conditions. When Stephen Girard 

2 17 



Business and Education 

planned the institution there was well recog- 
nized as a part of our industrial life a system 
of industrial apprenticeships. That system 
disappeared. The course of training which 
it offered no longer exists. Other and, per- 
haps, less efficient methods have come into 
vogue. 

There has been as marked change in the 
training which is available for the business 
man. It is by no means certain that a 
young Stephen Girard, having in every par- 
ticular a mental equipment equal to that of 
the young Frenchman who put out to sea a 
century ago and more to make his fortune in 
commerce, could to-day duplicate that suc- 
cess. Conditions have vastly changed. A 
new order of equipment is demanded. The 
staunchness of character, the same intrepid 
will, to-day will play their part as they 
played it then, but in addition there is now 
demanded a breadth of technical knowledge, 
a fund of specialized information, a com- 
prehension of intricate relations, and an un- 
derstanding of broad principles which the 
conditions of a century or even a generation 
ago did not make imperative. I have faith 
then that some new Girard, recognizing those 
changed conditions and consequent new de- 
mands, will make a benefaction which will 
help to give us clear-thinking, right-minded 
and well -equipped youths, from whom may 
i8 



Higher Education 

be developed future captains of commerce 
and industry. And if the example which this 
institution typifies serves to lead that bene- 
factor to give zmth his money the best there 
is in him of wisdom, experience, and judg- 
ment, to insure that the money be most wisely 
spent, then will there be fresh reason for us 
to honor the name of Stephen Girard. 



A NEW COLLEGE DEGREE 

An address delivered at the Convocation of the Uni- 
versity of the State of New York in the Senate 
Chamber at Albany June 29, 1905. 

In this gathering of professional educators 
I presume nothing less than the traditional 
bravery of the foolish would lead a layman 
into a discussion of a new phase of higher 
education. That would seem to be partic- 
ularly true in the face of a recent utterance 
by that revered dean of American learning, 
President Eliot of Harvard, when the sub- 
ject chosen is commercial education. Presi- 
dent Eliot has recently told us that it is mon- 
strous — the strong adjective is his — that 
it is monstrous that the common schools 
should give much time to compound numbers 
and bank discount, and little time to drawing. 
In the face of that vigorous declaration 
against utilitarianism, the layman must be 
foolhardy indeed who would raise his voice 
in advocacy of an education especially 
adapted to men wdio are to lead commercial 
lives. 

President Eliot has told us further that 
the main object in every school should be 
not to provide students with means of earn- 
ing a livelihood, but to show them how to 
20 



A New College Degree 

live happy and worthy Hves inspired by ideals 
which exalt both labor and pleasure. That 
desirable object he seems to believe can be 
best obtained by teaching children how lines, 
straight and curved, lights and shades, form 
pictures, rather than by leading their young 
minds into the waste places of compound 
numbers and bank discount. 

On any subject connected with education 
there is no opinion that should be more re- 
vered than that of the President of Harvard. 
His position is unique; his words are the 
voice of authority. This slighting opinion 
of bank discount and compound numbers 
which Dr. Eliot has expressed can, I pre- 
sume, hardly be taken as representing his 
unqualified view regarding practical educa- 
tion. Through all time there have been 
many distinguished utterances by philoso- 
phers and teachers as to the meaning of 
education. These men, however, have rarely 
agreed in their concepts of the purpose and 
the aim of education. Since the days of 
the Greek philosophers there has been little 
progress toward a generally accepted view 
of what education should aim to accomplish. 
When the doctors of learning themselves 
disagree perhaps a layman may be forgiven 
for differing from them on some points. 

It is certain that the college curriculum 
has undergone many changes and much de- 

21 



Business and Education 

velopment even within the period of years 
during which most of you have been actively 
connected with educational matters. We 
have seen great changes, marked broadening 
and much significant development in the 
studies generally prescribed as requisite for 
a college course. Those changes have been 
sufficiently marked to indicate that there is 
still, in the minds of those who are directing 
education, indefiniteness as to what is ab- 
solutely best in the way of instruction. The 
changes which have been going on have been 
sufficiently rapid and recent to lead one to 
believe that there may still be important 
changes, still material broadening, in the 
courses which our colleges offer. It is logi- 
cal, therefore, to believe that our system of 
higher education has not settled into any- 
thing like permanent form. The alterations 
which we have seen indicate that there are 
more to come. Curricula which are to-day 
regarded with the highest veneration, may 
to-morrow, in some, be found lacking and 
in need of modification. It is in the be- 
lief that the college curriculum is still in a 
period of transition and enlargement that I 
venture to give my views of one phase of 
higher education in which I think we are 
soon to see distinct developments. 

The experience which I have had in busi- 
ness, and particularly the experience which 



A New College Degree 

I have had with young college men in busi- 
ness affairs, leads me to the firm belief that 
much may properly be asked in the way of 
a broadened university curriculum. Much 
could be added that would be of great ad- 
vantage to the individuals who are to be 
future leaders in business life. But the 
added courses would be of value, not alone to 
those individuals, but in the future develop- 
ment of commerce along right lines and thus 
of importance in working towards the well- 
being of the commonwealth. 

I believe in the educated man in business. 
I believe the present college course is not the 
best that can be devised for the training of 
men who are to be leaders in commercial and 
financial life. It is true that we have scien- 
tifically classified a few of the principles and 
underlying laws of commerce and finance, 
and we teach them more or less well. I be- 
lieve many more of those laws and principles 
can be scientifically classified, and can be 
taught, and that the result of such teaching 
will make better business men, will qualify 
men for great responsibility earlier in life, 
will help solve the problems that new com- 
mercial conditions have raised, and will work 
to our national advantage, not only in the 
way of our pre-eminence in commerce, but 
also in the direction of a clearer understand- 
ing of the true relation between government 

23 



Business and Education 

and business, and therefore toward a better 
discharge of our duties as citizens. 

There should be no failure on the part of 
our educators to appreciate the increasing 
demands that are, by the changing character 
of commercial affairs, being laid upon the 
abilities of business men. The last two 
decades have witnessed changes that make 
necessary an entirely new order of ability 
in business life. Those changes demand a 
greatly superior training. We have seen 
the capital employed in business enterprises 
jump from millions to billions. That change 
is significant of something much more than 
mere growth in the magnitude of commercial 
operations. It is significant of fundamental 
alteration, in conditions and methods. We 
have seen struggling lines of railways united 
into systems and systems into vast nets, all 
operated imder a single management. We 
have seen whole industries concentrated into 
a few combinations, and those combinations 
dominating their especial markets through- 
out the world. These new conditions have 
surrounded us with problems for the solu- 
tion of which experience furnishes neither 
rule nor precedent. To solve them we need a 
grounding in principles, an understanding 
of broad underlying laws. 

The world is in great measure becoming a 
commercial unit. The eye of every business 
24 



A New College Degree 

man must be farseeing enough to observe all 
markets and survey all zones. A significant 
word spoken in any market place or parlia- 
ment of the world instantly reaches the 
modern business man, and he should be pre- 
pared correctly to interpret its meaning. 

Electricity has annihilated the geogra- 
phies, for it has destroyed the distinctions 
which gave geographical boundaries their 
significance. Political distinctions will con- 
tinue to live, languages and religions will 
continue to differ, but the peoples of the 
earth, regardless of political boundaries, of 
racial differences, of national ambitions, are 
coming rapidly to form one great commercial 
unit, one great economic organism. There 
are no tariff walls against capital. The 
language talked by money is a universal 
tongue. The modern business leader, there- 
fore, more than was ever the case before, 
needs a mind educated to think clearly, needs 
the ability accurately to trace effect to cause, 
and needs the training that will enable him to 
understand the true relation between far 
separated conditions and widely diverse in- 
fluences. 

With the limitless wealth of resources 
which we have had in America, the success- 
ful conduct of a business enterprise has been 
a comparatively easy matter. Nothing short 
of egregious error has been likely to lead to 

25 



Business and Education 

failure. Any ordinary mistake in judging 
conditions or in the application of principles 
has, as a rule, been obliterated by the rapidity 
of the country's growth and the extent of its 
industrial and commercial development. If 
some of the men who have made notable 
commercial successes had been forced to face 
the harder conditions that exist in the old 
world, the measure of their success might 
have been very different. Had they been 
confronted by a situation where population 
was pressing upon the means of subsistence, 
where all the soil was under cultivation, 
where the mineral resources were mieagre 
and where there was lacking the wealth of 
the virgin forests, they w^ould have needed 
greater abilities and better trained faculties 
in order to achieve such marked success. We 
are easily inclined to believe that we have 
the best business men in the world. I am 
disposed to agree w^ith that view. But one 
should not lose sight of the fact that the 
lavishness of opportunity has brought com- 
mercial success to many who have come into 
the field illy prepared and with small ability. 
Any one who is familiar with the commercial 
life of Germany and has seen the successes 
there built up out of a poverty of resources — ■ 
successes perhaps not comparing brilliantly 
with some of our own, until one studies 
the difhculties that had to be surmounted in 
26 



A New College Degree 

achieving them, — must perceive there some 
elements of business abihty superior to our 
own. There has been an astonishing increase 
of wealth and an enormous expansion in 
commerce in that nation. No one searching 
for the fundamental reasons, why German 
commercial progress is relatively so much 
greater than that of other European nations, 
will fail to reach the conclusion that one of 
the greatest factors in that country's devel- 
opment has been the prompt and intelligent 
use which has been made of the schools. The 
Germans have to the highest degree made 
practical application of their learning. They 
have brought the true scientific spirit to bear 
upon their every-day problems. Industry 
and commerce have both profited in the 
largest degree. To-day we find in that na- 
tion, in spite of its lack of natural resources, 
pre-eminence in many industrial fields, a 
striking pre-eminence in foreign commerce, 
and a superior intelligence in the administra- 
tion of finance. Those successes can all be, 
in the greatest measure, traced back to the 
schoolmaster. 

A certain unequalled native ability, coupled 
with unparalleled natural resources have 
united to help American business men 
achieve a measure of material success that 
has been in many cases, I believe, quite out 
of proportion to the ability brought to the 

27 



Business and Education 

work. In American business life the coming 
years can hardly be expected to offer so many 
easy roads toward business success as have 
appeared to the commercial wayfarer at 
every turn in years past. Our resources, of 
course, are far from reaching the complete 
development common in the old world 
countries. We have nevertheless advanced 
to a point of development where there will 
be less chance for success to come as a re- 
ward for haphazard and illy directed work. 
The successes of the future will be for better 
trained men. That is true not alone because 
we have in a measure already exploited our 
great resources, but because the field of com- 
mercial activity has so vastly broadened, be- 
cause there has been such an enormous gain 
in the magnitude of commercial operations, 
and because of the increasingly intricate re- 
lationships which have resulted from this 
broadening and this growth. The changed 
scope, character, and methods of modern 
business have united to demand men with a 
training superior to anything that was ever 
needed before, as the successful commercial 
leaders of the future. That general training 
cannot be had in the highly specialized proc- 
ess of the routine work of the office. The 
practical school of experience is too wasteful 
as a teacher of general principles. There 
will, of course, be the exceptional man who 
28 



A New College Degree 

will come up through that routine training 
and dominate his field by the force of his 
intellect, but in the main the new conditions 
of affairs demand a superior training such 
as only the schools can give. 

I know the majority of business men 
trained in the school of routine work will 
doubt the feasibility of teaching in the class- 
room, in a scientific and orderly fashion, 
those principles which they have gained only 
through years of hard experience and which 
they even yet recognize more by a sort of 
intuition than by conscious analysis. The 
engineers of an earlier day thought that blue 
overalls and not a doctor's gown formed the 
proper dress for the neophyte in engineering, 
but we have come long ago to recognize that 
the road to success as an engineer is through 
a technical school. So, too, I believe, we 
will in time come to recognize, though per- 
haps not to so full an extent, that the road 
to commercial leadership will be through the 
doors of those colleges and universities 
which have developed courses especially 
adapted to the requirements of commercial 
life. 

When I speak of a higher commercial edu- 
cation I am referring to an ideal education 
for commercial and financial leaders. An 
ordinary machinist does not require to be 
graduated a mechanical engineer. A riveter 
29 



Business and Education 

of bridge bolts has no need to have taken 
honors in a course of civil engineering. A 
bookkeeper, a stenographer, or a bank clerk 
does not require such a commercial educa- 
tion as I am suggesting. For all those posi- 
tions there should be special instruction, 
fitted to the character of the duties. My 
thought at the moment, however, is directed 
particularly towards the ideal form of uni- 
versity education for leaders in financial and 
commercial life. 

In advocating a so-called higher commer- 
cial education, I would not be regarded as 
desiring a college course highly specialized 
and devoted to technical subjects at the ex- 
pense of a broad cultural training. I would 
not be understood as advocating changes 
that will work towards a narrower college 
education, but rather changes that will work 
toward a broader one. I am not going to 
outline specifically what I think the curricu- 
lum should be for an ideal higher commercial 
education. At the present time such a defi- 
nite outline is impossible. It is impossible be- 
cause text-books must be written and teachers 
must be taught before that ideal course can 
be given. An ideal course such as I have 
in mind must at best be the development of 
years. There will be necessary action and 
reaction between university life and business 
life. Men must be better trained in the uni- 
30 



A New College Degree 

versity for their business careers, and then 
out of that business Hfe, and from among 
those better trained men, must in turn come 
men who will bring to the universities that 
combination of theory and practice, that 
knowledge of principles combined with fa- 
miliarity with practical detail, which in the 
end will make both ideal teachers and ideal 
business men. 

There is little or nothing that has been 
proven good that will need to be cut from 
the present college course. I believe the 
additional work and training that will be 
necessary in an ideal commercial education 
can easily be made possible within the pres- 
ent term of university residence by more 
effective and economical use of time. It 
will not be necessary to discard present re- 
quirements that have been found to be use- 
ful and have been proven productive of good 
results. It will only be necessary to apply 
to both the years of preparatory work, and 
to the years of the college course, the busi- 
ness man's keen antipathy to waste. The 
time can then be saved that will be needed 
for the mastery of those special lines of 
study that will differentiate this ideal com- 
mercial course from the work which is at 
present demanded for a college degree. 

I believe it is too nearly the truth that a 
college degree in America to-day does not 

31 



Business and Education 

mean a ^reat deal more than four years of 
residence at a college. It certainly does not 
mean that there have been four full honest 
years of hard and conscientious work as an 
absolute requisite for that degree. There is 
undoubtedly opportunity for a man to put in 
the fullest measure of industry, but there 
are few institutions where that full measure 
is absolutely required before they will give 
the stamp of their approval in the form of a 
degree. The schools that are most tenacious 
of classical tradition should hardly feel 
proud of the fact that practically the only 
institutions of learning in the country that 
absolutely demand a full and honest return 
of work done in exchange for the honor of 
their degrees are the technical schools. If as 
sharp a demand for time well spent were 
made in all colleges, a long step would be 
taken toward gaining sufficient room in the 
curriculum for the studies that will be neces- 
sary to make up an ideal commercial course. 

I am perfectly aware that among the vari- 
ous conceptions of the true aim of education 
there are many which agree with that of Dr. 
Eliot that a school is not for the purpose of 
providing the student with a means of earn- 
ing a livelihood. I sympathize with those 
conceptions which hold that the purpose of 
education is to create noble ideals, to en- 
courage the growth of the taproots of sound 

32 



A New College Degree 

character and to cultivate the blossoms of 
culture, but do not believe that my ideal of 
a commercial education is necessarily at vari- 
ance with these ideals. In advocating it I 
do not think it is necessary to adopt the view 
of the utilitarians, who believe that educa- 
tion should be merely a course of technical 
training, fitting the student for some prac- 
tical work. I would not make the mistake of 
planning a course of study which would 
merely be an anticipation of the duties of the 
counting room. I know there are some who 
measure the value of the work of a college 
by its success in being of practical and im- 
portant advantage to those who are prepar- 
ing for professional life. They believe that 
the school which will, in the briefest time, 
turn a man into an able lawyer, a competent 
engineer, or a -skilful physician, should be 
regarded as the most successful. People 
holding that very practical conception of the 
purpose of education should at least be glad 
to welcome a new field in which university 
training may be applied with practical re- 
sults, but I do not believe it necessary to hold 
these narrow views in order to agree that 
higher education may be so shaped as to be 
of especial advantage to young men looking 
forward to business careers. 

There are some who regard the university 
as primarily a centre for the diffusion of 

3 oZ 



Business and Education 

learning. That conception is imperfect, but 
I should think that those who hold it would 
recognize a field of the very greatest impor- 
tance in the work which might be done in 
the way of disseminating correct views in 
regard to financial and commercial subjects. 
If we had in our universities professors ca- 
pable of a thoroughly scientific understand- 
ing of the principles underlying many of the 
problems of finance and commerce, these men 
would help us to see distinctly and to think 
clearly in regard to some of our every-day 
practices and tendencies. The dissemination 
of such knowledge would surely be of great 
value. 

There are some whose conception of a 
university is that its greatest work should be 
in the field of scientific research. They have 
a noble ideal. They believe that the devel- 
opment of new knowledge is a work even 
superior to that of its diffusion. They aim 
to inculcate a spirit which will lead men to 
seek truth for its own sake, and to create an 
enthusiasm for scientific exactness. That 
idea is not at all out of harmony with the pos- 
sibilities of a higher commercial education. 

In the popular mind the motives of busi- 
ness men are often maligned. I know leaders 
in the business world who have as little con- 
cern for personal reward in what they seek 
to accomplish as would be the rule with men 

34 



A New College Degree 

engaged in scientific research. These men 
are devoted to certain commercial ideals. 
The making of money happens to be insep- 
arably connected with those ideals, but the 
making of money is not the great moving 
force. They are interested in the expansion 
and development of business, in the discov- 
ery of new fields of operation, and in the 
introduction of improved methods. Their 
interest in that work is no more ignoble than 
is the interest of any other specialist. Men 
who already have more than most ample 
means are not for personal gain pursuing 
business with an absorbing intensity. It is 
empire building with them, perhaps on a 
small scale or perhaps on a great one. Their 
lives are not sordid. They may be narrow, 
as the lives of all specialists are narrow, but 
the popular idea in regard to men whose lives 
are given to commerce, the view that these 
men are devoting their existence to mere 
money getting, is in great measure errone- 
ous. They have the same high type of imag- 
ination which usually marks men who attain 
eminence in any other line of activity. They 
are, in a large way or in a small way, as may 
be determined by their environments, using 
qualities similar to those that make great 
statesmen, great scholars, or great scientists. 
I believe, therefore, that a proper education 
for the highest work in commercial life 

35 



Business and Education 

might be so outlined as to be entirely in 
harmony in its practical application with the 
ideals of those who conceive that a univer- 
sity scientific habit of mind should be created, 
and where truth should be sought purely for 
the \o\t of the truth. 

A higher conception, perhaps, than all 
those others, is a definition which Dr. Had- 
ley gives us. In his view the most pro- 
foundly important work which falls to the 
lot of the American citizen is his duty in 
guiding the destinies of the country. He 
believes that if we train the members of the 
rising generation to do this ^yell, all other 
things can be trusted to take care of them- 
selves ; but if we do not train them to do this 
well, no amount of education in other lines 
will make up for the deficiency. Suppose 
then we accept that as the final test of a 
university training. How can the duties of 
citizenship best be taught? What are the 
requisites for a training in citizenship? I 
would answer, training in the highest con- 
ception of business. Of what does the work 
of guiding the destinies of the country con- 
sist? Consider what are the political prob- 
lems of the day and of the generation. A 
great part, nearly the whole of the work of 
government in a country like ours, is merely 
the conduct of business on a ver}^ large scale. 
Look over the political platforms of the last 

36 



A New College Degree 

generation, or study the messages of the 
presidents, and you will find a very large per- 
centage of the political questions that have 
been raised are, in their ultimate definition, 
merely commercial questions. What have 
they been? The money standard; the con- 
trol of trusts; the regulation of interstate 
commerce; railroad rebates; questions af- 
fecting the currency and banking; customs 
duties ; schemes of taxation ; the building of 
canals and the creation of plans for irriga- 
tion. These and questions like them have 
made up almost altogether the political ques- 
tions of the day. They are in the end merely 
business questions. No purely ethical prin- 
ciple is at stake. We have now no necessity 
for a discussion of the rights of man. Our 
government in the main is a great business 
enterprise and our political problems in the 
main are economic problems. 

In respect to such questions, what sort of 
training is wanted? Can any one answer 
them so well as a thoroughly trained busi- 
ness man, granting first that he is governed 
by the highest ideals of patriotism and hon- 
esty? Will not the man who is thoroughly 
well grounded in the principles of commerce 
and finance be better qualified to guide the 
destinies of our country than one who has 
merely had a training in the love for the 
beautiful or one who has won class prizes in 

37 



Business and Education 

Greek declamation? If Ave adopt President 
Hadley's view as to the most profoundly 
important work of the university, I believe 
that noble ideal is most distinctly in harmony 
with the conception I have of what is possible 
in the way of a higher commercial education. 
In this connection Dr. Hadley has made 
one of the wisest statements that has come 
from any modern educator. He has told us 
that every change in industry and political 
methods makes it clearer that mere intelli- 
gence is not sufficient to secure wise admin- 
istration of the affairs of the country, but in 
addition there must also be developed a 
sense of trusteeship. There is nothing so 
much needed in American life to-day, in my 
opinion, as a cultivation of a sense of trustee- 
ship. That need is by no means confined to 
political life but is the need standing above 
all others in commercial life. If the schools 
can teach it. and in a measure I believe they 
can. they will do more for commerce than 
they have done for engineering, or laAV, or 
science. If I were to name one thing pre- 
eminently to be desired as a result of a course 
of higher commercial education, it would be 
the cultivation of a proper sense of trustee- 
ship. I do not regard that as an impossible 
ideal. A truer understanding of the real 
relation and relative importance of the prin- 
ciples of commerce would give men a far 

38 



A New College Degree 

clearer view and juster appreciation of the 
responsibilities of trusteeship. We have 
men holding positions of great trust in our 
commercial life to-day who have a childish 
ignorance in regard tO' their responsibilities 
as trustees. These men are honest men, 
they are well-meaning men, but they have 
never learned the elemental principles upon 
which a sense of trusteeship must be built. 
I am not so optimistic as to believe that a 
college course could be so designed that those 
having its benefits would afterward in active 
life always be imbued with the highest sense 
of trusteeship, but I do believe that Dr. 
Hadley uttered a great truth when he 
pointed out that the cultivation of such a 
sense is the most important work that a col- 
lege has to do. If it is important in the 
education of the American citizen, it is doubly 
important in the education of that class of 
American citizens who have to deal with 
the commercial and financial life of the 
country. 

We are having an illustration to-day of 
how a clearer understanding of underlying 
principles of commerce illuminates ethical 
considerations. A generation ago, before 
we had thought very deeply or accurately in 
regard to the nature of common carriers, 
there were many men who saw nothing ethi- 
cally wrong in a railroad rebate. Men re- 

39 



Business and Education 

garded a railroad as a piece of private prop- 
erty and railroad transportation as a com- 
modity which might with perfect propriety 
be bargained for and sold to the best advan- 
tage. The whole community has since been 
educated to a clearer comprehension of the 
fundamental principles of transportation, 
with the result that we have built up ethical 
standards which absolutely did not exist be- 
fore. This I believe is an illustration of what 
might happen in many other directions with 
a better education embracing principles and 
underlying laws. 

I want to quote again from the President 
of Yale. Dr. Hadley says : " An intelligent 
study of science whether it be physics or 
biology, psychology or history, should train 
a man in that respect for law which is the 
best antidote to capricious selfwill on the 
part of the individual. The student learns 
that he is in the midst of an ordered world. 
If he has the root of the matter in him, he 
thereby gains increasing respect for that 
order and readiness to become himself a 
part of it." 

That statement we must all recognize as 
eminently true. Is it not equally true of the 
study of the science of commerce ? Will not 
such a study train men in that respect for 
law which is the best antidote to capricious 
selfwill on the part of the individual ? Is it 
40 



A New College Degree 

not that of which the country is to-day 
standing in the greatest need? What do we 
need more than an antidote to capricious self- 
will on the part of the accidental millionaire ? 
Does not a lack of knowledge of fundamental 
principles lead to a lack of respect for the 
great fundamental laws of finance? I be- 
lieve that is true. I believe when we have 
reached a point of really making a scien- 
tific classification of the principles of fi- 
nance and commerce, a classification which 
without question can be made, and when 
we have developed a class of teachers ca- 
pable of giving adequate instruction, and 
so made possible a course of study truly 
worthy of serving as the basis for a new 
college degree, we will then have taken a 
long step in the direction of creating that 
respect for law of which we are now in need. 
There will be a respect for economic laws 
because we will better understand their sig- 
nificance and force. There will be a greater 
respect for legislative laws because, with 
wiser legislators, those laws will more surely 
be based on correct economic principles. If 
all this is true, then whatever your ideals of 
education may be, cannot you all unite in 
helping to evolve a college course which will 
be worthy of upholding a degree of Master 
of Commerce? 



41 



THE YOUNG MAN'S FUTURE 

An address, delivered before the American Institute 
of Bank Clerks, St. Paul, 1905. 

Bankers are more or less given to predic- 
tion, to the making of forecasts and proph- 
ecies. They must form opinions in regard 
to the future. It is a part of their business 
to have definite ideas as to whether money 
is to be easy or close, whether business will 
be active or dull, whether collections will be 
good or otherwise. 

Financial prophecy, howxver, is full of 
difficulties. There are many currents and 
cross-currents to be reckoned with. The 
whole field of action is so much larger than 
any man's vision that inadvertently he may 
leave out of consideration matters of vital 
importance. The course of affairs may be 
completely altered by psychological condi- 
tions which cannot be weighed in the most 
carefully prepared tables of statistics. At 
best the keenest and wisest observers must 
write '' E. & O. E." in large letters after 
their attempts to divine the financial future. 
These distinguished bank officers who have 
dined with you this evening are undoubtedly 
skilled in such a correct grouping of facts 
42 



The Young Man's Future 

as enables them to draw accurate conclusions 
in regard to the financial future. 

There is another line of prophecy, how- 
ever, which is, I believe, quite as interesting, 
and far easier. If I were forced to turn seer 
and to undertake to forecast future events, 
and could I have my choice of fields, I would 
keep quite clear of any attempt at forecast- 
ing future financial affairs, and would adopt 
the easier course of attempting to predict the 
measure of success or of failure that is likely,* 
with added years, to come to a young man. 
Men ought to be as interesting as markets. 
I am certain that a prediction can be made 
regarding the future of a young man, if we 
have at hand the necessary data, with as 
much accuracy as we can predict the future 
of the market. There are many bank offi- 
cers here who could, I have no doubt, pre- 
dict, with correctness, the future course of 
money rates, of bank reserves or of gold 
imports, but with still greater chances of 
accuracy, I believe, they could predict the 
future careers of some of the members of 
this chapter of the American Institute of 
Bank Clerks. 

I believe it is possible to formulate certain 
rules and principles which, applied to the 
data in regard to a young man's capacity, 
character, and tendencies, will enable one to 
make an accurate estimate of his chances of 

43 



Business and Educatior^ 

success or his dangers of failure. If it is 
possible to lay down such rules, then some 
knowledge of those rules ought to be of 
value to young men. That is so because it 
is within the power of each young man to 
change in a large measure the character of 
the data in his case. Young men are not 
foreordained to failure or success. Their 
future is, in the main, of their own making. 
If they comprehend that certain characteris- 
tics or tendencies which they are forming 
w^ll have an enormous influence upon their 
future, if they clearly see that their career 
is in but small measure a matter of chance, 
and is in large measure the result of those 
early formed habits, characteristics, and ten- 
dencies, they will be less likely to feel that 
they must wait for some brilliant oppor- 
tunity to prove themselves; they will be 
more likely to understand that success must 
be won by sincere effort applied to each day's 
work. 

Without doubt there is among the young 
men who are members of this chapter of the 
American Institute of Bank Clerks the fu- 
ture president of a great bank. I believe I 
can pick out the man. I shall not name him ; 
you can do that better than I ; but I am going 
to tell you exactly who he is. This young man 
has, of course, certain fundamental qualities 
which are and must be common to every suc- 

44 



The Young Mans Future 

cessful man. He started out with good phy- 
sique, and he has not abused that heritage, for 
no man can be permanently successful without 
having an extraordinary capacity for work, 
— and health and working capacity are one. 
He has been naturally endowed with a per- 
sonality- which will permit him to work co- 
operativel}^ with his fellows, a personality 
which will permit him to win their regard, 
as well as lead him to recognize merit in 
others. Then, as a matter of course, he has 
at least a fair education; he is diligent, 
capable, and has already a character so well 
formed that there is every reason to believe 
that he will have integrity, uprightness, and 
honor so ingrained in him that men who 
know him will come to recognize that he is 
worthy of a trust. 

But all those characteristics, necessary as 
they are, by no means serve to designate the 
man. Those characteristics are general, and 
ought to be possessed by every young man. 

There are additional characteristics pos- 
sessed by the young man I am picking out, 
and they are the ones which will enable me 
more definitely to designate him. 

Given first those sound fundamentals, — 
good health, good character, at least a fair 
education, industry, and capacity, — we have 
then only determined the general class from 
which we will pick our man. This man I 

45 



Business and Education 

am indicating does his regular work well, but 
he has recognized that he must, as a matter 
of course, make his ordinary day's work a 
matter of constant good records. He sees 
that he is not entitled to special credit, and 
is not likely to receive extraordinary rewards 
for merely a record of ordinary good work, 
and so he has come to recognize that those 
lines which mark the limits of his daily task 
are not barriers to his further ettort. Those 
lines merely mark the work he has first to 
do. He has learned that every occasion that 
is ofifered, every opening that he could him- 
self make, which would permit him to break 
through those lines which mark his special 
daily duty and give him a chance to do other 
work, is an opportunity of the greatest im- 
portance. That statement is no platitude; 
data bearing on that phase of a young man's 
character form one of the most illuminating 
guides we have in forecasting a career. It 
tells the measure of the man's coming useful- 
ness : it tells how quickly he will learn the 
whole detail of his business : it tells whether 
he has that invaluable spirit of co-operation 
without which great success cannot be built. 
The man we are picking out has learned that 
lesson. He knows that of all things neces- 
sary for his development opportunity is one 
of the most essential. — opportunity to work, 
opportunity to learn. He has found that 
46 



The Young Marl's Future 

doing some other man's work in addition to 
his own when occasion offered, has made 
him master of some other man's knowledge, 
and has added greatly to his own capabilities 
and his value. He has found that his true 
salary is made up of two parts ; that the 
money he receives is but one part of it, the 
opportunity to learn is the other. He has 
not feared he would work too much for the 
salary he was getting, because he has found 
that working is learning, and that what he 
is learning is after all by far the more val- 
uable part of his salary. 

When a young man has learned that an 
added duty is a new opportunity of great 
value, when he has learned that an added 
task is something to be welcomed with en- 
thusiasm, he has marked himself for pro- 
motion, he has separated himself from those 
of his fellow^s who believe in making their 
services just balance their salaries ; he has 
opened the door of opportunity and his prog- 
ress is likely to be rapid toward a complete 
mastery of the details of his business. 

I wish I had the eloquence fully to empha- 
size the strength of my belief in the practical, 
hard-headed sense of these assertions — to 
emphasize my faith in the result of an every- 
day application of them. If I understand 
correctly any single principle on which suc- 
cess is based, I know that a true one is this : 

47 



Business and Education 

Do more than you have to do that you 
may learn more than you need to know 
for doing- your own simple daily task, and 
with this broader doing and wider learn- 
ing you will be laying the substantial foun- 
dation that is required for any career of 
eminence. 

There is another lesson of great value 
which has been learned by this young man 
whom I am designating to you as a future 
bank president. He has learned systemati- 
cally to use the time which is available out- 
side of his regular work. You will find that 
this young man whom I am singling out has 
not been satisfied with the progress he has 
made in the course of his regular work. He 
may have started with a broad, sound edu- 
cation ; but even so, he soon found he would 
need a more specialized education if he were 
thoroughly to master the principles of his 
business. He attacked this problem of a 
specialized education with the same energy 
and enthusiasm which he has brought to his 
daily work at the bank. There has been 
nothing desultory and intermittent about his 
method. The work has been systematically 
planned and constantly carried on. The 
work in itself has been a pleasure in the 
doing ; in its result it has given to this young 
man a specialized knowledge and a grasp 
of principles wdiich in the future will be of 



The Young Marl's Future 

a value to him greater than he now can 
comprehend. 

There is one more characteristic which the 
young man possesses and to which I want to 
call your attention. It is a characteristic 
which might lead some of you to doubt that 
he was marked for large success. You may 
perhaps have thought that he lacked a cer- 
tain shrewdness, that his ambition for per- 
sonal advancement was not keen enough, 
that he was a little slow-going when it came 
to forcing recognition of his own abilities 
and hard work. Just there is where you 
may be wrong. This man's interest in the 
work has been greater than his interest in 
himself. To get the thing rightly done has 
been his thought rather than merely to get 
the credit for doing it. In travelling along 
the road leading to success a man should not 
have his eyes solely on the milestones; in 
straining to see the milestone, which is too 
far ahead, one may fail to avoid the obstacle 
directly in the path. That advice does not 
alone apply to the progress of the young 
man. It is a truth that he may well heed, 
even after he has reached a position of much 
influence and power. The great man in 
commerce to-day is the co-operative man, 
the man who sees clearly the right thing to 
be accomplished and is willing to sink his 
individuality to accomplish it ; the man who 

4 49 



Business and Education 

is more interested in getting the thing done 
than he is in getting credit for doing it. We 
must give great prominence to that quahty 
of patience which our future bank president 
possesses. Patience to wait for personal 
reward, patience to work co-operatively with 
others, a patience which rises to self-abne- 
gation before a great work to be done — a 
self-abnegation which sees only the one 
thing, and that is the thing to be accom- 
plished, and is willing to sink for the time 
the gratification of ambition, personal pride, 
and personal reward. 

Here then is the man : He has health, char- 
acter, ability, industry. More than that, he 
has learned to welcome new work as new 
opportunity, and he has learned systemati- 
cally to use his time outside of his regular 
work in gaining a specialized knowledge 
which will give him a thorough grasp of the 
principles of his business; and then above 
all that, he has taken greater interest in his 
work than in himself. He has cared more 
for getting the thing done right than he has 
for getting the personal credit of doing it. 

I have laid before you the data which will 
enable you, with almost unerring accuracy, 
to name the man. Unless there is some 
defect of personality or some accident of 
opportunity, the man who best fits this out- 
line will in a decade stand out from among 

50 



The Young Man^s Future 

his fellows a leader ; he will be wearing the 
honors of distinction and carrying the bur- 
dens of responsibility, — aye, and remember 
that ; he will be carrying the burdens of re- 
sponsibility ! Perhaps we need not envy 
him; perhaps some of you who, though no 
less faithful, though no less honest, but who 
will have held to a humbler plane, will be the 
happier. I am not sure but you will. Cer- 
tainly you cannot all be bank presidents. 
We need many privates, and comparatively 
few generals. Not a few of you, filled with 
ambition though you may be to-day, will go 
on year after year in faithful regularity, 
holding places of great trust, needing 
strength to resist constant temptation, ham- 
pered always by an inadequate income, and 
never advancing to the highest positions. 

When I was honored by an invitation to 
this banquet, I accepted because I had a par- 
ticular message I wanted to deliver to you, 
to you in the ranks. I have a suggestion to 
make to the American Institute of Bank 
Clerks which, if it meets with your favor, 
may, I believe, work out a plan of lasting 
benefit, both to banking interests and to the 
banking profession. 

I have lately been giving some attention to 
the subject of old-age pensions. I have been 
studying with much interest the remarkable 
system which is now in operation in Ger- 



Business and Education 

many, a system under which seventeen mil- 
lion of the htimbler workers of that nation 
have been secured against the fear of an old 
age of penury, a system under which $150,- 
000,000 is now being annually distributed 
that the workers of Germany may be made 
comfortable in sickness and in old age. It 
is a system smacking nothing of charity, but 
giving honorable and honestly earned com- 
forts to the w^hole industrial army of the 
German Empire. 

More recently I have had the pleasure of 
studying with Mr. Andrew Carnegie this 
old-age pension problem as it especially 
affects the noble profession of teaching. His 
study of the subject has, as you all know, 
resulted in a magnificent benefaction, in the 
creation of a fund of $10,000,000, to pension 
college professors when they reach a resting 
point in their careers of usefulness. Public 
opinion seems pretty generally agreed that 
no more wise benefaction could have been 
made by the great philanthropist. 

I believe there are other classes entitled 
to security against an old age of poverty, 
in degree perhaps less, but in principle as 
truly as are the great teachers of the country. 
The man who lives a life of integrity, al- 
though subject to constant temptation, who 
handles wdth skill, accuracy, and honesty 
vast sums of money in his lifetime, but re- 

52 



The Young Mail's Future 

tains but a very modest amount as his salary 
compensation, the man who from the nature 
of his profession must keep a spotless record, 
who may not even take those investment 
chances that would be proper enough for 
another man to take, and whose accumula- 
tion for old age must be by patient saving 
and conservative investment — such a man 
is entitled to consideration. I believe it is 
wrong that such a man need have a fear that 
after a lifetime of honest faithfulness, of 
industrious trustworthiness and most mod- 
erate remuneration and opportunity, I say I 
believe it is wrong that such a man need have 
a fear that after he has made that record 
he may still have to face an old age of pov- 
erty. It is the strength of that belief that 
has brought me here and which leads me to 
presume to make a suggestion to the Ameri- 
can Institute of Bank Clerks. I believe that 
as a body the bank clerks of this country 
should be made secure in the assurance that 
a lifetime of faithfulness, industry, and in- 
tegrity shall be followed by an old age 
free from want. There will be a satisfac- 
tion in that sense of security which every 
bank clerk can afford to pay something for, 
and it will be something that every stock- 
holder in any banking institution can well 
afford to pay something for, and to pay 
substantially. 

53 



Business and Education 

My suggestion, then, is that the American 
Institute take up this subject, study it in the 
Hght of what has been done in other coun- 
tries, study it in the hght of some beginnings 
which have been made here, confer with 
bank officers, and finally evolve a plan which 
will meet with the general approval of the 
banking interests of the country. And I 
am here now to say that when you have 
done that, the institution of which I am an 
officer, will, if you will permit, have great 
pride in heading with its name the list of 
banks accepting the responsibilities of the 
plan. 

I have much faith in the useful purposes 
which the Institute of Bank Clerks may 
serve. Such meetings as this cannot but 
be useful. The spirit of systematic study 
which is being encouraged by the educa- 
tional department is, I believe, of immense 
value. The whole movement can be so di- 
rected as to awake new interest in the day's 
work, and draw out new ambitions. I believe 
there never was before a keener demand for 
thoroughly trained men than there is to-day. 
I believe there were never before greater 
opportunities for such men, and surely there 
were never before anything like such great 
rewards. There is little in the outlook that 
need be discouraging to the young man of 
ambition; there is much that should call 

54 



The Young Man's Future 

forth from him the best possible display of 
his powers. The American Institute of Bank 
Clerks may be made an important instru- 
ment in this work, and I hope it is to go 
on to years of great usefulness. 



55 



TRADE SCHOOLS AND LABOR 
UNIONS 

The World's Work, 1906. 

When a few years ago the newspapers 
coined the phrase, " The American Com- 
mercial Livasion of Europe," it came into 
instant popularity. We thought it a most 
happy way of describing the entrance of the 
United States into the world's competitive 
markets. Indeed, for a time, it was a phrase 
that brought apprehension to foreign na- 
tions; for our progress was so rapid, our 
competition became so severe, that it was 
difficult to say where the concjuest was to 
stop. Later events, however, demonstrated 
that it could not go on unhalted. 

It is true that we are still proud, and have 
much good reason to be proud, of our success 
in international competition. We have seen 
our exports of manufactured products double 
and double again. We have seen, with justi- 
fiable pride, that we are able to make many 
manufactured articles of commerce more 
cheaply than any other people in the world 
can make them. We have combined with 
the advantage of unexampled supplies of 
raw material an unequalled genius for doing 
things on a great scale. With notable clear- 
56 



Trade Schools 

ness we have seen the economic advantages 
of great industrial combinations. We have 
been quick to recognize industrial waste, 
whether in the form of unneeded labor, of 
loss of by-products or of unnecessary trans- 
portation. To reduce waste in the form of 
unnecessary labor we have taken full advan- 
tage of every ingenious machine which our 
remarkable talent for mechanical invention 
could devise. We have brought together 
industrial units into huge combinations, and 
have then administered them with a far- 
seeing wisdom that has made us able to 
produce certain great staple articles of man- 
ufacture so cheaply that our competition has 
been the despair of other nations. 

But after we admit all that, after we grant 
that we have a giant's crushing grasp on the 
international industrial markets wherever 
we have been able to bring into play the 
combination of our advantages in cheap raw 
material with the economies of production 
on a vast scale and with the aids of most 
ingenious labor-saving machinery — after 
granting all this, we still must admit that we 
are a long way from having really gained 
command of the competitive industrial 
markets. 

It is something of a shock to reflect that 
practically every victory we have gained in 
international competition has turned on con- 

57 



Business and Education 

siderations of cheapness and not on consid- 
erations of quality. Our talent for mechan- 
ical invention seems unequalled, and it has 
won us many victories it is true, but, aside 
from the advantage which that special in- 
genuity gives us, there are few articles we 
bring to the international markets upon 
which we would dare rest our success solely 
on claims of high-grade workmanship. 
Wherever we have won success we have as 
a rule won it because we could manufacture, 
en masse, with wonderful economy. We 
have been successful because we could make 
a thing cheaper, — not because we could 
make it better. 

So far as my recollection goes, I have 
never found in a European shop half a dozen 
articles of American manufacture that were 
offered because they were superior to similar 
articles of European manufacture. They 
may have been offered because they were 
more ingenious, they may have been made on 
such a scale of production, turned out with 
such economy, in an endless grist from some 
great automatic machine, that they chal- 
lenged comparison in cheapness; but it is 
rare indeed to find in Europe an article of 
American manufacture that is offered solely 
on the ground of superior workmanship. If 
real accuracy of workmanship is wanted, if 
artistic form and taste are desired, if thor- 

S8 



Trade Schools 

oughly skilled and trustworthy handicraft 
is sought, it will not as a rule be found in a 
display of American wares. If we look for 
a production that has had worked into it 
some of the soul and the character of the 
workman who made it we will rarely find it 
bearing the legend : " Made in America." 

We must recognize that the great indus- 
trial development which we have seen take 
place within our memories has had its main 
foundations built up of something else than 
of superior manual skill. These foundations 
are to be found in cheap raw material, in the 
economies of manufacturing on a vast scale, 
and in the aids given by the greatest utili- 
zation of labor-saving mechanical devices. 
It has been a perfectly logical and natural 
consequence that in building a great indus- 
trial success upon such factors as these we 
should for a time sacrifice highly skilled 
handicraft. We have seen the subdivision 
of work carried, in our great manufacturing 
establishments, to the highest imaginable 
point. As a result we have seen the demand 
for skill diminish. It has seemed for the 
time being that all that is necessary is to 
teach a man to tend a machine, to make him 
an automatic wheel in the mechanism, and 
then to ask nothing more of him in the way 
of brain or breadth of understanding or of 
thoughtful outlook. 

59 



Business and Education 

Men rejoiced at the accomplishment of an 
invention which would do with perfectness 
tasks which before had recjuired many hands 
skilled by long training. When the output 
of such a machine AA'as placed in competition 
with the hand-made goods of other countries 
we gathered for a time new laurels in the 
progress of our commercial invasion. Then 
our competitors came to study our methods 
and to appropriate our ideas. 

Wq have carried on this s^^stem of special- 
ization and have adopted these mechanical 
aids to such an extent that in certain lines 
we can manufacture cheaply enough to have 
little to fear from competition in any quar- 
ter, and we can at the same time pay 
wages, even to our automatic workers, that 
are a marvel to the wage earners of other 
countries. 

But, Avith all these advantages, we are be- 
ginning to find that there are countervailing 
losses. While we have made it possible for 
the unskilled man to tend a machine and 
turn out the product with wonderful econ- 
omy, we are now beginning to find that, in 
keeping that man confined to tending the 
machine, in giving him no intellectual inter- 
est in his work and no opportunity for any 
but the narrowest outlook upon the field of 
industry in which he is engaged, we have 
unintentionally taken almost certain means 
60 



Trade Schools 

to prevent his mental and technical develop- 
ment. We have of late heard much of the 
call of the employer for skilled men to super- 
vise work. We have heard employers mar- 
vel that, while the lowest paid ranks of their 
workmen are fully supplied, they have the 
greatest difficulty in finding men to fill the 
higher positions. The reason is of course 
most obvious. Men need training to become 
skilful. They must have variety of work if 
their outlook and technical skill are to have 
breadth. They must know something of 
principles if they are to have original ideas 
of value. I believe that we have failed 
utterly to grasp the problem of the relation 
between education and our industrial devel- 
opment and prosperity. 

Within the memory of most Americans 
there has been what amounts to nothing 
short of a revolution in industrial affairs. 
We have seen England lose much of her pre- 
eminence among the industrial nations. We 
have seen two other nations grow from com- 
paratively small beginnings to places of the 
first rank. I have indicated what I believe 
to be the principal elements upon which our 
own industrial success has been based. But 
we have seen another nation without the 
special advantages of raw material which we 
have enjoyed push forward in a development 
as rapid as ours, and wrest from others in 

6i 



Business and Education 

the competitive fields the advantage they 
had long held in security. Germany has had 
the scantiest aid from nature to make that 
progress possible. Not only has she had no 
wealth of raw material such as we have had ; 
she has had no vast homogeneous domestic 
market, a factor which has been of vital aid 
in building up our own manufactures. Her 
people have lacked the peculiar inventive 
ingenuity which has in many fields of indus- 
try been the sole basis for our achievements. 
Her artisans have not possessed that delicate 
artistic sense which has made the handiwork 
of France superior to the obstructions of all 
tariff walls. Her industries have been forced 
to grapple with English competitors who 
were entrenched behind a domination of 
international markets successfully main- 
tained for generations. But amidst a pov- 
erty of natural resources, and from among 
a people not singularly gifted either with 
inventive ability or artistic temperament, we 
have seen emerge in a generation the great 
industrial forces of the German Empire. 

The time is within the memory of most of 
us when Germany was in large measure an 
agricultural state winning but meagre re- 
turn from sterile acres. There were neither 
rich mines below ground nor exhaustless 
forests above. Whatever was done by the 
Germans had to be done in the sweat of their 
62 



Trade Schools 

brows. Whatever they have accompKshed 
we must admit they have fairly earned, for 
they have been heirs to few bounties of 
nature. 

I have made a somewhat careful study of 
Germany's economic success, and in doing 
that I have become firmly convinced that the 
explanation of the remarkable German prog- 
ress is to be traced in the most direct man- 
ner to the German system of education. 
The schoolmaster is the great corner-stone 
of Germany's remarkable commercial and 
industrial progress. The school system of 
Germany bears a relation to the economic 
situation that is not met with in any other 
country. 

We all know something of the thorough 
secondary education which the compulsory 
education laws of Germany insist shall be 
given to every youth under fourteen. We 
all know something of the high standing of 
her universities and the great practical value 
of her technical schools. There is another 
feature of the German educational system, 
however, about which less is known in this 
country, but which is, I believe, a feature 
of the most direct importance in shaping 
Germany's industrial progress. 

There is a division of instruction in Ger- 
many known as continuation trade schools. 
These schools are designed for the instruc- 

63 



Business and Education 

tion of youths engaged in regular industrial 
employment. They are auxiliary to the 
ordinary schools, and entirely outside of the 
scheme for regular academic training or of 
higher technical instruction. They are for 
the rank and file of workers, for the privates 
of the industrial army. The courses are so 
arranged that they supplement the cultural 
training that the youths have had in the reg- 
ular school system, and at the same time 
supplement the technical routine of the shop 
or the office. 

The students in these trade schools are 
youths who have completed the regular com- 
pulsory educational course and have gone 
out into the ranks of active industrial and 
commercial workers. The hours of instruc- 
tion are so arranged that they fall outside 
the regular hours of labor. The curriculum 
is broadly practical. It includes the science 
of each particular trade — its mathematics 
or chemistry for instance — and its tech- 
nology. But it does not stop there. Prin- 
ciples of wise business management are 
taught. The aim is to prepare a student for 
the practical conduct of a business. He 
gains knowledge of production and con- 
sumption, of markets and of the causes of 
price fluctuations. He is put into a position 
to acquire an insight into concrete business 
relations, and into trade practices and con- 

64 



Trade Schools 

ditions. Are not such aims worthy of Amer- 
ican schools? What truer democracy can 
there be than a school system that will point 
the way to every worker, no matter how 
humble, by which he may reach a clearer 
comprehension of the industry in which he 
is engaged, and with the aid of this knowl- 
edge may rise to a position of importance in 
that industry? 

To do all this does not mean the ** com- 
mercializing " of our educational system. 
There is no need for opposition even from 
those who hold that it is not the place of the 
schools to teach youths how to earn a liveli- 
hood. Those educators who lay strongest 
emphasis upon such phrases as " character 
formation," '' mental discipline," and '' har- 
monious cultivation of the faculties " may 
continue to hold firmly to those views and at 
the same time welcome an auxiliary school 
system which, without curtailing their ideal 
culture courses, will give after the ordinary 
period of school life is over the opportunity 
for valuable practical instruction. 

Such an auxiliary system of trade schools 
would be available for the youth only after 
he has left the direct influence of our present 
school system. There are in the United 
States 10,000,000 youths from fifteen to 
twenty years old. Three-quarters of that 
number are not in attendance at any school. 

S 65 



Business and Education 

Here are seven and one half millions of 
young people from whom the students of 
such trade schools would be drawn. 

Surely it needs little training in the econ- 
omies of industry to comprehend what an 
unreckonable advantage it would be if 
a substantial proportion of that seven 
and one half millions were to be brought 
within the influence of a new and entirely 
practical system of education designed to 
make each pupil a more efficient economic 
unit. 

The present generation of American youth 
entering industrial or commercial life is to 
encounter new and in some respects harder 
conditions. So far as we conceive educa- 
tion to be in any sense a preparation for 
practical life, there have been laid upon us 
new demands and fresh responsibilities. The 
industrial life of this country has in a decade 
undergone changes more significant than 
had been encompassed before in a period 
of two generations. Teachers whose lives 
have been largely in the classroom are not 
likely to have comprehended fully the true 
significance of the development of the forces 
of combination. There has been combina- 
tion in the field of labor as evidenced in the 
growing power of unionism; combination 
in the domain of capital as manifested in the 
trusts; concentration in the control of in- 

66 



Trade Schools 

dustries, in the subdivision of labor, and in 
the aggregation of weahh. 

This display of the forces of combination, 
equally significant in the fields of labor and 
of capital, has brought changed conditions in 
the problem of human industrial endeavor. 
The welfare of the people and the position 
which our country is to maintain among 
nations both depend on no single thing more 
than on the recognition of these changed 
conditions by our educators. They must 
recognize the new demands of the times. 
They must provide the educational requi- 
sites which these changed conditions make 
imperative. 

The forces of combination — the labor 
union and the trusts — are united and are 
working in harmony to accomplish at least 
one thing. They are united in a tendency 
to make commercial or industrial autom- 
atons of a great percentage of our popula- 
tion. They both tend to subdivide labor, and 
thereby to limit the opportunity to acquire a 
comprehension of broad principles. They 
both tend to circumscribe the field of the 
apprentice, narrowing his opportunity, forc- 
ing him into petty specialization and restrict- 
ing his free and intelligent development. 
All this is placing us in grave danger of 
evolving an industrial race of automatic 
workers, without diversity of skill, without 

67 



Business and Education 

an understanding of principles, and without 
a breadth of capabiHty. 

There is but one power that can counteract 
that tendency — the schoolmaster. Youths 
who can gain from their daily work only 
that narrow, routine, technical experience — • 
wdiich in the main is all that the conditions 
of modern industry offer — have a right to 
something more. They have a right to op- 
portunity for a practical education. As mod- 
ern conditions narrow their technical train- 
ing, those same conditions broaden the op- 
portunity for the man who does acquire 
knowledge which will give him a grasp of 
more than a single detail of his business. '- 

The mental ecjuipment of a business man 
needs to be greater to-day than was ever 
before necessary. Just as the sphere of a 
business man's activity has broadened with 
the advent of rapid transportation, tele- 
graphs, cables, and telephones, so has the 
need of a broad understanding of sound 
principles increased. It was steam processes 
of transportation and production that really 
made technical education necessary. The 
electric dynamo created the demand for 
technically educated electrical engineers, and 
the railroad, the fast steamship, the electric 
current in telephone and cable and the great 
economic business combinations are making 
the science of business a different thing from 

6d> 



Trade Schools 

any conception of commerce which would 
have existed two generations ago. The en- 
larged scope of business is demanding better 
trained men — men who understand prin- 
ciples. New forces have made possible large- 
scale production, and we need men who can 
comprehend the relation of that production 
to the world's markets. There has been in- 
troduced such complexity into modern busi- 
ness, and such a high degree of specializa- 
tion, that the young man without the foun- 
dation of an exceptional training is in clanger 
of remaining a mere clerk or bookkeeper. 
Commercial and industrial affairs are con- 
ducted on so large a scale that the neophyte 
has little chance to learn broadly either by 
observation or by experience. He is put at 
a single task. The more expert he becomes 
at it the more likely it is that he will be kept 
at it, unless he gains a training which fits 
him tO' comprehend in some measure the re- 
lation of his task to those tasks which others 
are doing. 

I do not believe it is enough for us to say 
that we will give to our youths the best edu- 
cation possible to train them as intelligent 
citizens. I do not believe it is enough to 
give them a few years of elementary educa- 
tion and when they go forth to actual work, 
offer them no educational aid or training 
to better comprehend the principles in the 

69 



Business and Education 

field of industry in which their Hves are 
cast. 

Many noble teachers have held a beautiful 
theory that their work should be devoted to 
building up character and culture in a youth. 
They would so garb him in an armor of 
sweetness and light, so instil into his mind 
the love of the beautiful and build up gen- 
erally by cultural instruction his mental char- 
acteristics that for such a youth any labor 
would be dignified, and he would be pro- 
vided with springs of learning and appreci- 
ation from which, without regard to material 
surroundings, he could always drink with 
the deepest satisfaction. That is the ideal 
of those who believe that we must beware 
of commercializing our educational system, 
who believe that we should aim at the train- 
ing of character, the giving of culture, and 
waste none of the youth's precious time with 
instruction in trades and occupations. It is 
a noble ideal, but we must recognize the fact 
that a boy set to forge such an ideal armor 
before he is fifteen years of age will find it an 
imperfect protection against the difficulties 
of modern industrialism. 

What I believe we need is, not a radical 
change in our present school system, but 
rather a material addition to it. I am con- 
fident that the present system of education 
does not meet the present requirements of 
70 



Trade Schools 

commercial and industrial conditions. From 
the youth who must early earn his own living 
I believe we have taken away the advantages 
of school training- at too early an age. There 
is a vast army of young men actively em- 
ployed in commercial and industrial callings 
who feel, or can be made to recognize, the 
great need which they have for a better 
understanding of the principles of their 
business, and who recognize clearly enough 
that these principles cannot, except in the 
rarest of cases, be learned at the workbench 
or at the desk under the present condi- 
tions of modern commercial and industrial 
life. 

I am convinced, too, that Germany's in- 
dustrial success and the comparative content- 
ment of her population are in a very large 
measure due to her system of trade schools. 
Now I want to leave no confusion in the 
minds of my readers as to just what I mean 
by these trade schools. I do not mean the 
addition of manual training to the course 
of the public schools ; that may or may not 
be wise, but the decision of that question has 
no bearing whatever on the sort of school I 
have in mind. I do not mean the establish- 
ment of schools to teach young men trades. 
I know that such schools have been open to 
much criticism from practical workers and 
will meet much opposition from labor unions. 

71 



Business and Education 

I recognize force in the hostile attitude of 
organized labor in regard to schools designed 
to teach trades. Their point of view may be 
selfish, but it is perfectly human. I do not 
mean either that we have any lack of higher 
technical schools. I think we are fully 
abreast of the rest of the world in the facil- 
ities we offer for training our captains of 
industry. 

It is the rank and file that I am consider- 
ing, the privates of the great industrial army 
who have gone forth to the daily grind of 
work, taking with them such mental equip- 
ment as our school system has been able to 
give to youths of fourteen or sixteen years. 
These young men are fitted into the great 
industrial and commercial organizations, 
and come under the influence of our system 
of specialization and of our developmicnt of 
automatic machines. They face at once the 
danger of becoming automatic workers. On 
the other hand, industry and commerce are 
squarely facing the very grave danger of 
training up an army composed solely of au- 
tomatic workers — an army that will be 
without active intelligence or effective train- 
ing in considering the requirements and de- 
velopment of the industries with which it is 
engaged. I believe we need to establish for 
the members of this army a means which will 
aid them to gain a supplementary education 
72 



Trade Schools 

along lines particularly adapted to their 
requirements. 

Some of us are apt to find much fault with 
the labor situation. We criticise the attitude 
of trades-unions and the demands of labor 
organizers. Might it not be well to remem- 
ber that we have created an industrial con- 
dition in which, in a very large measure, one 
man's work is exactly like another's ; and 
in certain fields, the work of all largely auto- 
matic, that our industrial situation is doing 
quite as much as the labor organizers to re- 
duce to a dead level of equality the value of 
men's time in certain industrial lines? 

If we want men who will think for them- 
selves, must we not give them a training 
which will enable them to think correctly? 
If we want men to become attached to their 
work and their positions, must we not give 
them an intellectual interest in that work? 
If we want independence of thought in a 
workingman, must we not provide him with 
the opportunity to be something more than 
an automatic figure revolving, without voli- 
tion, interest or active intelligence, as the 
wheels of industry revolve ? From the point 
of view alone of the attitude of the working- 
man toward the industrial problems of the 
day I believe we are doing less than our duty 
in the way of education, and very far less 
than the selfish interests of capital would 

n 



Business and Education 

demand if employers had a clearer vision on 
this subject. 

Americans have thought and talked much 
about the need for educating the sovereign 
citizens of a democracy. To-day we are face 
to face with this fact. We have come to 
have within our republic another democracy. 
In importance it is second only to that of the 
State itself. It is the democracy of organized 
labor; a democracy of representative gov- 
ernment demanding an intelligent constitu- 
ency if it is to have intelligent administra- 
tion. There are times when the welfare of 
more people is directly affected by the de- 
liberations of a council of labor leaders than 
would be concerned over a vote in Congress 
on a measure of prime importance in national 
legislation. 

Americans long ago grasped the idea that 
education is necessary in a republic. That is 
the corner-stone of the theory of our govern- 
ment. We long since recognized that an in- 
telligent, representative government could 
only come out of intelligent citizenship. 
That fact is just as true of the democracy of 
united labor as it is of the democracy of the 
republic. It is no academic theory, it is a 
hard practical fact, of immediate application 
to the welfare of capital and labor alike. 

If I may again turn to Germany for an 
illustration, I would say that one of the most 

74 



Trade Schools 

important influences which has been working 
toward the intelHgent moderation of the atti- 
tude of organized labor is to be found in the 
superior education of the workers — in the 
educational system which has provided or- 
ganized labor with leaders who have a 
broader grasp of the problems of industry 
and a clearer understanding of its principles 
than they could have had without special 
educational advantages. 

If it can be demonstrated that this is a 
correct view — that moderate and wise ad- 
ministration of the great democracy of or- 
ganized labor is more likely to follow if 
the masses of workmen are educated toward 
a better intellectual comprehension of the 
principles of the industries with which they 
are engaged — then what money value could 
be put, in this country, upon such a system 
of education as would ultimately give to 
organized labor wiser leaders? I believe 
there is a profound and important truth in 
this view. If we drift toward a condition 
in which automatic workers live without in- 
tellectual interest in their labor we must 
expect them to follow — without indepen- 
dence of thought — unwise leaders along 
paths that will be destructive for capital and 
labor alike. If we offer educational facili- 
ties that will tend to train a considerable 
number of the youths following industrial 

75 



Business and Education 

callings so that they will better comprehend 
the nature of their work and its relation to 
the whole industrial organization, if w^e will 
provide schools that will awaken an intel- 
lectual interest in the day's task and kindle 
ambition which will lead men on to better 
work and greater contentment, we shall ac- 
complish a step in the development of our 
educational system which will be of greater 
importance than any other change in educa- 
tional methods that is now under consider- 
ation. 

I want to assert with all the force which 
my conviction on the subject will give that 
such a thing is not a dream. There is a 
vital demand for the development of our 
educational system along such lines as I 
have been indicating. When I speak of the 
youth whose life has been cast in an indus- 
trial calling keenly desiring to find the means 
for gaining an intellectual understanding of 
his surroundings I am not speaking of con- 
ditions which I imagine to exist. Out of my 
own personal experience I know something 
of this subject. 

I started life as an apprentice in a machine 
shop, with the mental training which a 
country school gives to a boy of sixteen. I 
supposed at that time I should always follow 
the career of a mechanic, and very early in 
my apprenticeship I was strongly moved to 

76 



* Trade Schools 

get some intellectual grasp of the work. But 
although I was in a community proud of 
its schools, it had nothing to offer to youths 
whose days were fully taken up with their 
regular occupations. With considerable dif- 
ficulty I found a man who could teach me 
drafting, another who was willing to give 
instruction in mathematics. I want to em- 
phasize that I was not one whit different 
from my fellows in blue overalls. Much of 
the money that I spent to pay my own in- 
structors I earned by teaching mathematics 
out of working hours to my shopmates. 
They were cjuite as keen as I for an oppor- 
tunity to get an intellectual outlook on the 
business in which they were engaged. They 
had no desire to be mere tenders of machines. 
I am confident that, if the opportunity had 
been at hand, a considerable portion of these 
young men would have entered w^ith zealous 
interest upon a systematic educational de- 
velopment if it had been shaped along lines 
that made its practical application to their 
daily work apparent. 

Let me summarize my convictions on this 
subject. We have in a brief period built up 
a striking industrial success. The main ele- 
ments of that success have been threefold : 
First, cheap raw material ; second, ingenious 
labor-saving inventions ; third, industrial 
combinations resulting in the great economies 

77 



Business and Education * 

of production on a large scale. Our success 
in the international markets has in the main 
been built on cheapness, not on quality. 

The very nature of our success has been 
such that it has minimized the value of su- 
perior handicraft. The character of large- 
scale production, the effect of the sub- 
division of labor and the result of the exten- 
sive use of labor-saving devices have united 
in a tendency to make automatons of our 
workers. That tendency is of necessity in- 
creased by some phases of the organizations 
of labor. 

The result is a changed order in industrial 
life. In many fields of industry, indeed in 
many phases of commercial life also, it is 
only the rarely exceptional man who is able 
to raise himself above the deadening influ- 
ence of his surroundings — surroundings 
that give him a single specialized task to 
perform and demand of him no intellectual 
interest, no understanding of the principles 
of the industry, no ambition for a broader 
technical skill. 

The man without intellectual interest in 
his work, without understanding of the re- 
lation of his task to other things, and with- 
out ambition pushing him steadily toward 
technical improvement, is in a dangerous 
position. That he is in a position dangerous 
to himself is obvious, for if men live lives 

78 



Trade Schools 

lacking incentive to improvement they will 
deteriorate. That he is in a position dan- 
gerous to industry is also evident, for no 
bounty of nature, no industrial combination 
however high, no mechanical invention how- 
ever ingenious, can succeed with directing 
intelligence without that united skill of hand, 
of brain, of broad experience, which can 
only come from men properly trained in the 
ranks. 

But such a man not only is in danger; 
even more, he is a danger. He is a danger 
to the state. We have to admit that the 
prosperity and security of the state itself lie 
in the direction of wise leadership for the 
gigantic forces of organized labor. Such 
wise leadership will only be born out of a 
wise constituency. Every argument that 
can be advanced for the education of a citi- 
zen of a republic applies with as great force 
to the still broader education that is needed 
by those who shape the course and decide the 
destinies of the democracy of organized 
labor. If to be a good citizen requires a 
comprehension of the form of our govern- 
ment, a knowledge of the principles of civics, 
a development of a sense of the responsi- 
bility of citizenship, and a comprehension 
of the sacredness of a public trust, then just 
as truly it is due the state that a member of 
a labor organization should have in addition 

79 



Business and Education 

to the ordinary equipment of the citizen an 
understanding of the principles of industry, 
a comprehension of the relation and im- 
portance of the various parts of the indus- 
trial organization — a breadth of industrial 
view, in brief, and an understanding of eco- 
nomic principles. 

Our school system has not thus far pro- 
vided this, but it is not a difficult thing to 
provide. It means no revolutionary change 
in our present system. It means only an 
addition. The step is not a pioneer one. 
The system is at work in Germany on a huge 
scale, attracting hundreds of thousands of 
youths to its benefits and profoundly affect- 
ing the industrial, indeed the whole national, 
life of that empire. To make the experi- 
ment here would involve no possible danger, 
would interfere in no unfortunate way with 
our present school system, would entail no 
expense worthy of consideration. All that 
is necessary is for American manufacturers 
and business men to see the worth of the 
experiment. Exactly the means to bring 
into play could be soon decided. 

My own belief is that the movement 
should be partly individual, partly the devel- 
opment of the public-school system. I be- 
lieve the representatives of organized labor 
and the representatives of organized capital 
should unite in planning the work. The 
80 



Trade Schools 

leaders of industry and the leaders of labor 
should give, not money — the tax payers 
can readily bear the small additional burden 
there would be — but themselves, their hearty 
interest, their careful thought, their helpful 
influence and good-will. If that is done they 
will bring an influence into industrial life 
which will be of incalculable value — of 
value ethically, intellectually, and financially 
— and will set an example for which the 
whole country will owe them gratitude. 



THE BUSINESS MAN'S READING 

Saturday Evening Post, Philadelphia, 1902. 

It is as important for the young business 
man to choose well in making his literary 
friendships as it is to use care in selecting 
his personal associates. Perhaps the first 
word of advice in any suggestions regarding 
a young business man's reading should be 
along the line of impressing upon him the 
desirability of making literary friends, but 
it should be hardly necessary to waste much 
time in emphasizing the value of well-di- 
rected reading in advancing any business 
career. 

One of the reasons why the young business 
man does not always readily see the value of 
much reading is that he is apt to be of a 
thoroughly practical bent, and not quick to 
appreciate the worth of things that are not 
immediately available as means of advance- 
ment. If a course of reading should be out- 
lined with sound judgment for the average 
young man in the early years of his business 
life, he would be apt to ask wherein was the 
practical utility of the greater part of it. If 
he is a bank clerk, for instance, and is told 
82 



The Business Man's Reading 

to read political economy, it is not at all easy 
for him to see how such reading will make 
him a better bank clerk. It requires no 
political economy to total a column of figures 
correctly. In the bank clerk's whole experi- 
ence he has never been called on for any aca- 
demic knowledge of that character, and he 
sees that he probably never will be. To 
waste time over a lot of reading that has no 
practical application to the work in hand 
seems useless. 

The thing that the young business man 
should clearly understand is that a well- 
directed course of systematic reading will 
be of value not so much in helping him better 
to do the work he has in hand as in preparing 
him to do much more important work. The 
young bank clerk whose duties are simple 
and routine may ask what good it will do 
him to know the history and provisions of 
the national banking law. It will do him 
very little good if he intends always to be a 
bank clerk; it may do him a great deal of 
good if he hopes to be a bank officer. One 
should not, then, search too closely for the 
evidence of a direct relation between a well- 
outlined course of reading and immediate 
advancement in his position. The relation 
is there, but the reader must have faith 
enough to do a great deal of hard, earnest 
work without expecting advances in salary 

^3 



Business and Education 

to follow with the same regularity with 
which diplomas w^ould be earned in school. 

If any number of successful business men 
were asked what thing it is that the young 
business man most needs to help him on the 
road to business success, I believe the an- 
swer would be unanimous, and it would be 
— character. This is not an idle platitude. 
It is sound, practical judgment, and it will 
be the most strongly emphasized by the men 
who are the most experienced in affairs. The 
more I see of business life, the more clearly 
I comprehend the great practical value, quite 
apart from their ethical worth, of some of 
the well-worn and homely old maxims — 
those maxims which many boys have thought 
may do well enough for copybook texts or 
as subjects for graduating essays, but to 
which they have attributed little practical 
importance as foundation stones of business 
success. I believe that successful business 
men are of one accord in saying that up- 
right, sturdy, trustworthy character is, more 
than anything else — indeed, more than 
everything else — the foundation of worldly 
success. 

If that is true there can be no more prac- 
tical advice than that the young business 
man should lead his reading along lines 
which will be helpful in character-building. 
One need hardly make a catalogue of books 

84 



The Business Man's Reading 

of this sort. Different minds will gather 
inspiration from various sources. The pre- 
cepts of the Bible, of course, every one will 
accept as the very best for such purpose. 
Emerson, Marcus Aurelius, Franklin — the 
authors are endless, but they will be better 
selected by the reader than by any one else 
for him. 

One never can tell what particular bit of 
wisdom may get its grip on a young man's 
mind and have profound influence in shaping 
his character and his business success. I 
recollect, when I was an apprentice-boy, that 
I got hold of an old file of some Scotch en- 
gineering magazine, and I read there some 
homely advice as to the value of character 
in the machine shop. The writer pointed out 
the advantage of a boy so conducting him- 
self that his foreman should have confidence 
in his character ; such confidence that, when 
something went wrong, when there was a 
delinquent somewhere to be discovered, the 
foreman's mind would at once set this boy 
aside with a secure feeling that suspicion 
need not be directed against him. That sim- 
ple bit of good advice happened to make so 
much of an impression on my mind that I 
have no doubt it shaped a good many actions 
and was undoubtedly of real practical value 
in securing advancement. 

Along with reading that is useful in char- 
ts 



Business and Education 

acter-building there should go reading that 
will create high motives and ideals, for high 
motives and ideals are of much more prac- 
tical value in shaping a successful career than 
a good many young men believe. The read- 
ing of well-written biographies will, perhaps, 
be the most useful in that connection, so 
many of them point to the possibilities of 
growth from humble beginnings, and show 
the force there is in singleness of purpose 
and in devotion to some clear aim. One will 
not read many biographies of successful men 
without being struck with the similarity of 
the underlying reasons for success. 

If character is the first requisite of a suc- 
cessful business career, perhaps the second 
may be said to be a keen knowledge of one's 
fellow-men and a clear understanding of the 
mainsprings of human action. Experience 
in life gives us that, and it is out of that that 
the shrewdness of the experienced business 
man is built. Much knowledge of this sort 
can be had from reading. Many of the 
Bible stories, read purely as literature, will 
help to-day, as they have helped for genera- 
tions, in forming accurate judgments of men. 
It is in this direction that there is real, prac- 
tical value in novel reading. Novels which 
give correct pictures of life and clear analy- 
sis of human character will, if rightly read, 
add almost veritable living people to one's 
86 



The Business Man's Reading 

list of acquaintances. That means a widen- 
ing of one's experience. Dickens, Thack- 
eray, Howells, George Ehot, Jane Austen, 
Mrs. Humphry Ward, have all created char- 
acters that are as real as living people. The 
reader whO' has added those characters to 
his acquaintance has added to his knowledge 
of human nature. To read carefully a novel 
written by a master-hand means a distinct 
broadening of one's knowledge of human 
motives. 

One of the absolute essentials of a busi- 
ness man's reading is the newspaper. Prob- 
ably most people would say that to the busi- 
ness man it is the most important source of 
information, and some might say that it 
contains all that a business man needs to 
read. For my part, I am very far from at- 
taching to the newspaper the importance 
which it would seem to merit if we should 
judge by the relative amount of time which 
the average business man gives to it. There 
are distinctly bad results that come from ex- 
cessive newspaper reading. One is the great 
waste of time in reading unimportant and 
ephemeral news. In the making up of the 
morning daily paper the perspective as to 
the importance of things must be altogether 
distorted by the necessity for putting high 
value upon the latest incident. There is still 
worse distortion in those papers which have 

87 



Business and Education 

many editions each day. The trivial thing 
that happens an hour before the paper goes 
to press, and in the account of which a paper 
may hope to " scoop " its rival, will, in the 
position which the editor naturally gives it, 
far outweigh the really important event which 
happened twenty-four hours before. Any 
business man who has received his bundle of 
home papers in a foreign city knows how 
quickly he can go through them when the 
dates are a fortnight old, and how little he 
finds in them of real importance. 

As to business subjects, I have had oppor- 
tunity to know something of newspaper 
writing from the point of view both of 
the newspaper desk and the business man's 
desk. I appreciate the obstacles that are in 
the way of accurate newspaper work, because 
I have labored under them : the necessity for 
haste, the impossibility of obtaining com- 
plete data, the desire for sensational pres- 
entation in a form that will interest a large 
reading public, the unavoidable difficulty of 
handling subjects with which the writer must 
at times have little familiarity; and on the 
other side I have seen something of the in- 
accuracies in newspaper work that are at 
once recognized by the business man who 
knows the facts; the lack of value which 
much serious newspaper writing of this na- 
ture really possesses ; to say nothing of the 



The Business Man's Reading 

sensational journalism where accuracy is 
entirely subordinated to startling presenta- 
tion. Such knowledge as I have, gathered 
both inside and outside the newspaper office, 
leads me to place a good deal of stress upon 
the suggestion that the young business man 
can waste a great deal of time on the daily 
newspaper. 

Of course, the daily newspaper must be 
read, but I believe the less time there is put 
upon it, and the more time there is left for 
better-prepared writing, the greater will be 
the gain. If the young business man's in- 
terests are broad I think he can with much 
profit read one foreign newspaper: such a 
paper as the London Times or the Standard. 
I have been greatly impressed with the men 
who are the foreign correspondents of those 
two great English newspapers. The regu- 
lar correspondents of the Times in at least 
four of the great European capitals — Paris, 
Berlin, Vienna, and St. Petersburg — are 
men who have held their important positions 
for at least twenty-five years. They are bet- 
ter trained in European politics than the 
average diplomat accredited to those courts, 
their sources of information are of a superior 
character, and the reviews which they write 
of political and commercial conditions are 
extremely valuable. If the business man 
reads a foreign language, such a paper as 



Business and Education 

the Frankfurter Zeitung is the highest type 
of a business newspaper, and can be read 
with great profit by any one who wishes to 
keep thoroughly abreast of the currents of 
European commercial life. In this country 
we have two or three dailies devoted ex- 
clusively to business interests — papers like 
the New York Commercial and the Journal 
of Commerce, and they cover remarkably 
well the commercial and industrial field. 

I believe, however, that one can keep 
abreast of current events much more ac- 
curately if he gives comparatively little time 
to the daily paper and a great deal of time 
to the weekl}^ review. Such journals handle 
current affairs with dignity, keen judgment, 
and much greater accuracy than is to be 
found in the hurriedly prepared articles of 
the average daily. If such weeklies are sup- 
plemented by monthly magazines and other 
publications which secure articles on sub- 
jects of the most living interest, written by 
men well qualified to write them, and cover- 
ing most of the phases of commercial, finan- 
cial and industrial development, a knowledge 
of current affairs will be gained incomparably 
more accurate than would result from the 
reading of daily newspapers. 

Some of the technical weeklies, of which 
the Financial Chronicle in this country and 
the Economist and the Statist in England 
90 



The Business Man^s Reading 

are the Highest examples, cover the financial 
field in a way that leaves little to be desired. 

Specific suggestions as to what one should 
read are of importance, but I believe of quite 
as great importance is some advice on how 
one should read. It is pleasant to drift about 
in a boat with oars gently lapping the water 
now and then as one feels lazily inclined to 
pull them; it is quite another thing to sit 
in an eight-oared shell, under the eye of an 
expert trainer, and pull over a four-mile 
stretch, making every stroke and every 
pound of weight count for its utmost. The 
indolent attitude of mind with which many 
people read headlines or turn pages bears a 
good deal the same relation to attentive read- 
ing that idle drifting in a rowboat bears to 
the hard exercise and full physical develop- 
ment that come with good work in a good 
crew. About the best one can say of time 
spent in indolent reading, leaving as it does 
but the haziest of mental impressions, is that 
the reader has been saved from spending his 
time in something worse than idleness. 

I believe that how to read is really more 
important than what to read, because good 
method in reading makes good selection in- 
evitable. Loose writing, inaccuracy of state- 
ment, untruthful delineation of character, 
will none of them stand before the careful 
analytical reader. If he is reading with 

91 



Business and Education 

right method he will waste little time on poor 
selections. 

If you are in doubt as to whether you are 
getting the most out of your reading ask 
yourself how much you remember of the 
last thing you read. If it was a novel, do 
you clearly recollect the names of all the im- 
portant characters? One of the best attain- 
ments of a business man is a clean-cut mem- 
ory for the names and characteristics of the 
men with whom he comes in contact. 

A business man can afford to give up a 
little of his time to current scientific reading, 
to keeping his high-school natural phil- 
osophy or his college physics up to date, to 
keeping in touch in a general way with 
scientific discoveries and the trend of modern 
research — in a superficial way, perhaps, but 
still to a degree that may at some time or 
another in one's business career be of real 
practical importance. 

All these suggestions are rather general, 
and may seem unsatisfactory because they 
lack specificness. What the young man 
wants to know is how he should specialize his 
reading so as to make it of distinct advantage 
in his everyday work. Generally speaking, 
he should read along lines which will give 
him knowledge that his superiors ought to 
have, and this will mean that he is fitting 
himself for better things. If his career is in 
92 



The Business Man^s Readmg 

mercantile lines, he should seek the fullest 
information i"egarding his particular line of 
business. The shoe salesman who will spe- 
cialize his reading- upon leather and leather- 
working, who will learn about the different 
processes of tanning and the different meth- 
ods of manufacture, will not only be a better 
judge of the goods he is handling but will 
be better able to sell them. The bank clerk 
who will master the history of the develop- 
ment of the banking system may not see the 
application of that knowledge to his daily 
task, but if opportunity sometime knocks at 
his door he will be much better prepared to 
accept the burden of greater responsibilities 
and wider usefulness./' 



93 



THE AMERICAN " COAIMERCIAL 
INVASION" OF EUROPE 

Scribner's Magazine, 1902. 

I. The European Point of View 

" England has been hard hit by the Trans- 
vaal War, but is still the richest country in 
the world ; France is without initiative, satis- 
fied w^ith returns on past achievements ; Ger- 
many shows the greatest energy and initia- 
tive in Europe, but has travelled too fast; 
America has an unparalleled combination of 
natural resources and initiative, and will go 
on to greater achievements." 

This was a summing up of national quali- 
fications in the world's industrial struggle, 
by the Russian Minister of Finance, M. de 
Witte. 

I had asked M. de Witte to give his views 
of the relative positions of the great nations 
in the world-wide industrial contest. There 
is no man whose answer to such a question 
may be listened to with more interest. Ser- 
gius de Witte is a man of whom we have 
heard much, but from whom we have heard 
94 



" Commercial Invasion " of Europe 

little. In the minds of many he is Europe's 
foremost statesman. He shapes the policies 
of Europe's mightiest empire. He watches 
with greatest care the varying financial cur- 
rents, and is in the closest touch with com- 
mercial and industrial tendencies. 

His Excellency was in his private office 
in the Finance Ministry in St. Petersburg 
seated at a great flat-topped desk, piled high 
with official problems, neatly sorted and 
tagged ready for his examination. It was 
Sunday, but he had been hard at work all 
the morning. While I was with him I heard 
him make appointments as late as eleven 
o'clock that night. It is easy to see why he 
has gained the reputation for being the hard- 
est worked man in Europe. Broad, strong, 
forceful, but with the repose and atmosphere 
of reserve power which mark most great 
men, his personality gave added interest to 
his reputation. He reached for a fresh cigar- 
ette, from a case he had been steadily de- 
pleting, and touched it to an odd electrical 
contrivance on his desk, which automatically 
lighted it. Then he leaned back reflectively 
and spoke with a freedom in refreshing con- 
trast to the reserve of many lesser officials. 

" England is still the richest country in 
the world," he said. " This Transvaal 
trouble has had marked effect on the finances 
of that country, and indirectly has affected 

95 



Business and Education 

the finances of every country in Europe. If 
Mr. Chamberlain will stop here, if he does 
not put the burden of any more such cam- 
paigns on England, she may be able to main- 
tain her pre-eminent position. Should she 
have too many Chamberlains and too many 
Transvaal campaigns she might be ruined. 
But up to the present time English pre-emi- 
nence is not seriously shaken. The nation is 
still in the strongest financial position of all 
the great powers, and may reasonably expect 
to continue there. France is like a small 
rentier. She is contented with a modest in- 
come; contented to sit with her lap filled 
with securities, representing past achieve- 
ments and present investments, and cut off 
the coupons. France is not looking for new 
industrial fields ; she is building no new rail- 
roads ; she is making no commercial con- 
quests. France is satisfied now simply to 
sit down at home, contented to reap the small 
rewards that are naturally hers. While those 
rewards may seem small, however, they be- 
come in the aggregate great enough to place 
her in the forefront financially. Germany, 
in her natural resources, is poorer than Eng- 
land or France, but she is rich in initiative 
and energy. The German nation offers the 
most striking example of initiative and en- 
ergy that can be found in Europe. Indus- 
trially, she has made astonishing strides. 
96 



" Commercial Invasion " of Europe 

But along many lines the progress has been 
unnatural and too rapid, and trouble may 
come of that. 

" America is already one of the richest 
countries of the world; perhaps, in natural 
resources, quite the richest. There we find 
not only remarkable natural richness, but 
combined with that wealth the most pro- 
nounced initiative met with anywhere. With 
such a combination the country is bound to 
make the very greatest progress. It will go 
on and on, and will be greater and still 
greater. America is especially fortunate in 
that she has no great military burden. Mil- 
itarism is the nightmare and the ruin of 
every European finance minister. 

" The industrial crisis which you find here 
in Russia is not confined to this country. 
You will find it more or less pronounced all 
over Europe. Many enterprises have de- 
pended largely upon English capital. Eng- 
land's Transvaal war has forced her to draw 
in her wealth, and that contraction has had 
a marked effect upon the industries of all 
Europe. People who were carrying on busi- 
ness with the aid, directly or indirectly, of 
English loans, have been forced to make 
other financial arrangements, and frequently 
have been compelled to curtail their opera- 
tions. That reduction of credit and with- 
drawal of capital have acted and reacted 
7 97 



Business and Education 

until they have become important factors 
in bringing about widespread industrial 
depression. 

" England has not been alone, however, 
in expending large amounts of capital in 
military campaigns. The powers have all 
spent great sums in the last year in the mili- 
tary operations in China. The floating of 
loans in that connection has made demands 
upon capital that have further embarrassed 
industrial affairs. Here in Russia we have 
had, in addition to those unfavorable influ- 
ences, other embarrassing conditions. The 
Government has been building less railroad 
than has been constructed at any time during 
the last ten years. As the Government is 
the chief customer for railroad supplies, de- 
pression has naturally followed in all indus- 
tries depending upon railroad construction. 
Then there have been industrial enterprises 
organized here on a not too sound financial 
basis. But as we get farther away from 
some of these special causes of depression, I 
think the industrial crisis will end." 

There can be no doubt of the interest of 
M. de Witte in the subject he was discussing. 
Russia's need for capital is like Sahara's 
thirst for water. There is probably no man 
in Europe more anxious than he to see the 
whole earth smile under the blessings of 
peace, the particular blessings in which he is 

98 



" Commercial Invasion " of Europe 

interested being a low rate of interest and a 
market hungry for bonds. 

I met M. de Witte, as I met all the other 
finance ministers of Europe, on a tour which 
I made last year to obtain the European point 
of view regarding America's industrial ex- 
pansion. The European view of the com- 
petitive positions which the great nations 
occupy in the struggle for international trade 
development is just now a matter of keen 
interest to the people of the United States. 
As an officer in the financial department of 
the Government, during the period of the 
most extraordinary development in the 
whole history of our foreign trade relations, 
I was especially interested in this subject. 
I wanted the point of view and conclusions 
of some of the men who were equally in- 
terested observers, but who were looking at 
the development from without rather than 
from within. For four years I had seen at 
close range the growth of a favorable trade 
balance which had assumed a total in that 
brief period greater than had been the net 
trade balance from the founding of the Gov- 
ernment up to that time. That was a phe- 
nomenon which had had few parallels in our 
economic history, and the desire to study it 
from the European point of view led me to 
visit nearly all the countries of Europe. I 
was offered rather unusual facilities for ob- 
. .r 99 



U \M 



Business and Education 

taining the views of men most influential in 
political life and commercial affairs. The 
diplomatic representatives at AA^ashington 
introduced me to the finance ministers of 
their home governments, and through the 
foreign treasury officers I was able to meet 
the heads of all the imperial and state banks ; 
through other channels, prominent bank 
officers and industrial leaders. It is my pur- 
pose to give some of the observations and 
deductions which resulted from this tour. 

The subject I discussed with these dis- 
tinguished foreigners is one regarding which 
our public has been pretty thoroughly en- 
lightened in the last five years, and it is one 
of which the European public has heard al- 
most as much in the English and Conti- 
nental newspapers, but from quite an op- 
posite point of view. When the amount of 
our sales to foreign countries passed the 
$1,000,000,000 mark in 1897, we began to 
congratulate ourselves on the strides we 
were making in the markets of the world. 
The record was followed by steadily grow- 
ing totals, until now we have, in a tw^elve- 
month, sent to other nations commodities to 
the value of $1,500,000,000. The meaning 
of that total is emphasized if we look back 
and find it compares with an average during 
the ten years ending 1896 of $825,000,000. 

While our sales to foreign countries have 
100 



" Commercial Invasion " of Europe 

grown so prodigiously, the other side of our 
financial account during these last five or 
six years has shown no proportionate in- 
crease. We have bought from the foreign- 
ers an average of only $800,000,000 a year, 
and that total has shown little tendency to 
expand. It was this fact, this mighty de- 
velopment of our sales, while our purchases 
were, comparatively, on a declining scale, 
which piled up in half a dozen years a fav- 
orable trade balance so enormous as to startle 
the world. In the last six years we have 
sold in merchandise, produce, and manu- 
factures $2,000,000,000 more than we have 
bought; while in all our history, from the 
beginning of the Government up to six years 
ago, the foreign trade balance in our favor 
had aggregated a net total of only $383,- 
000,000. 

The significance of these surprising totals 
was recognized on both sides of the Atlantic. 
An analysis of them brought out features 
more important than the vastness of the 
aggregate. Heretofore our sales had been 
made up almost wholly of foodstuffs and 
raw materials. Europe was the workshop. 
But that has changed, and we find, year after 
year, an astonishing increase in our exports 
of manufactured articles, an increase that in 
the last two or three years reached totals 
which gave ample basis for the popular talk 

lOI 



Business and Education 

of our invasion of the European industrial 
fields. Our exports of manufactured articles 
in the decade prior to 1897 averaged $163,- 
000,000 annually. In 1898 our sales of 
manufactured articles to foreign customers 
jumped to $290,000,000, the next year to 
$339,000,000, the next to $434,000,000. 

These figures, showing a steady invasion 
by our manufacturers of foreign industrial 
fields, have a natural corollary. As exports 
of manufactures increased, our imports of 
the handiwork of foreign shops showed an 
even more rapid decline. Our manufacturers 
were not only invading the foreigner's own 
markets, meeting him at his threshold with 
a new competition, but they were taking 
away from him his greatest market — the 
United States. We have in the last half- 
dozen years been manufacturing for our- 
selves a vast amount of goods, such as we 
have been accustomed to buy abroad. 

One can turn from a contemplation of 
these great totals to an examination of the 
records made in recent years by individual 
industries, and find in detail facts upon 
which to base a belief that the United States 
has acquired, or is acquiring, supremacy in 
the world's markets. So many industries 
have been sending rapidly increasing con- 
tributions to swell the rising tide of our 
foreign commerce that it is difficult to tell 
102 



" Commercial Invasion " of Europe 

any detailed story of American commercial 
expansion without making it read like a trade 
catalogue. The increase in our exports of 
manufactured articles can, in the main, be 
traced to advances made in the manufac- 
ture of iron and steel, and to the display of 
inventive talent in the making of machinery. 
The development of our grasp on the world's 
markets for articles manufactured from iron 
and steel has been no surprise to those who 
early recognized the position of America in 
respect to the raw materials from which 
those articles are produced. America un- 
questionably possesses advantages, in respect 
to her iron ore and her coal mines, far 
superior to those of any other country, and, 
based solidly upon that superiority, has al- 
ready become the greatest producer of iron 
and steel in the world. 

American locomotives, running on Amer- 
ican rails, now whistle past the Pyramids 
and across the long Siberian steppes. They 
carry the Hindoo pilgrims from all parts of 
their empire to the sacred waters of the 
Ganges. Three years ago there was but one 
American locomotive in the United King- 
dom ; to-day there is not a road of impor- 
tance there on which trains are not being 
pulled by American engines. The American 
locomotive has successfully invaded France. 
The Manchurian Railway, which is the 
103 



Business and Education 

real beginning of oriental railway-building, 
bought all its rails and rolling-stock in the 
United States. American bridges span 
rivers on every continent. American cranes 
are swinging over many foreign moles. 
AMierever there are extensive harvests 
there may be found American machinery 
to gather the grain. In every great market 
of the world tools can have no better rec- 
ommendation than the mark " I\Iade in 
America." 

\\& have long held supremacy as a pro- 
ducer of cotton. Wq are now gaining su- 
premacy as makers of cloths. American 
cottons are finding their way into the mar- 
kets of every country. They can be found 
in Manchester, as Avell as on the shores of 
Africa and in the native shops of the Orient. 
Bread is baked in Palestine from flour made 
in Minneapolis. American windmills are 
working east of the Jordan and in the land 
of Bashan. Phonographs are making a con- 
quest of all tongues. The Chrysanthemum 
banner of Japan floats from the palace of the 
Mikado on a flag-staff cut from a Washing- 
ton forest, as does the banner of St. George 
from \\'indsor Castle. The American type- 
setting machines are used by foreign news- 
papers, and our cash-registers keep accounts 
for scores of nations. America makes 
sewing-machines for the world. Our bi- 
104 



" Commercial Invasion " of Europe 

cycles are standards of excellence every- 
where. Our typewriters are winning their 
way wherever a written language is used. 
In all kinds of electrical appliances we have 
become the foremost producer. In many 
European cities American dynamos light 
streets and operate railways. Much of the 
machinery that is to electrify London tram 
lines is now being built in Pittsburg. The 
American shoe has captured the favor of all 
Europe, and the foreign makers are hasten- 
ing to import our machinery that they may 
compete with our makers. In the Far East, 
in the capital of Korea, the Hermit Nation, 
there was recently inaugurated, with noisy 
music and flying banners, an electric railway, 
built of American material, by a San Fran- 
cisco engineer, and now it is operated by 
American motormen. 

One might go on without end, telling in 
detail the story of American industrial 
growth and commercial expansion. In the 
list of our triumphs we would find that 
American exports have not been confined to 
specialties nor limited as to markets. We 
have been successfully meeting competition 
everywhere. America has sent coals to 
Newcastle, cotton goods to Manchester, 
cutlery to Sheffield, potatoes to Ireland, 
champagnes to France, watches to Switzer- 
land, and " Rhine wine " to Germany. 

i°5 



Business and Education 

Our public has generally looked upon the 
development of our foreign trade as only- 
one of the incidents in the remarkable period 
of prosperity which we have been enjoying, 
and has not, perhaps, clearly analyzed its 
full significance. The European, I found, 
had come nearer to a real understanding of 
the situation. 

A distinguished Berlin economist outlined 
an idea which seemed to me interesting. 
" Two or three generations ago," he said, 
" there were families in America living a life 
of almost complete industrial independence. 
Not only was all the necessary food raised, 
but within the household there were spinning 
and weaving and the application of all neces- 
sary trades. The invention of machinery, 
the development of factory life, the special- 
ization of industry, made such independence 
impossible. That which happened to the 
family a hundred years ago has happened 
now to the nation. Specialization has gone 
on, and concentration, combinations, and 
trusts have made it as impossible for the 
small manufacturer to compete with the 
great as it was for the hand-loom and the 
spinning-wheel to- compete with the factory. 
The perfect and instant communication be- 
tween distant parts of the world, the cheap- 
ening of transportation, the wider knowl- 
edge of every country, its products and its 
1 06 



" Commercial Invasion " of Europe 

needs, have brought about an interdepend- 
ence of nations that is now almost as great 
as the dependence of one class of industrial 
workers on another. This national depend- 
ence, this necessity of every country to more 
and more largely buy and sell in foreign 
markets, is forcing every nation, whether it 
wills or not, into participation in an inter- 
national industrial struggle. That is the 
keynote of the new century. Whoever will 
forecast the future of nations can now make 
no more useful study than an examination 
of their comparative industrial equipment. 

" History is becoming more and more the 
story of industrial development," he con- 
tinued. " The strength of a nation becomes 
more nearly measured by its wealth, its im- 
portance in the world's progress, by its rela- 
tive commercial position. History will more 
and more be written in ledgers and balance- 
sheets, in trade statistics, and in the figures 
which show the results of industrial con- 
quests or defeats. Modern iron-clads and 
smokeless powder have largely taken out of 
warfare the element of personal bravery, 
and have substituted technical skill and exec- 
utive ability. Many of the same qualities 
which win great industrial battles are to-day 
potent in deciding the results of military 
campaigns. Commercialism in its highest 
sense has been the real object back of half 
107 



Business and Education 

the military movements of the last decade. 
It may all seem very sordid and unromantic, 
but I believe that a study of the comparative 
price-currents of nations, an analysis of 
trade balances, an understanding of the 
statistics of production and consumption, 
will give the data which are now needed in 
making a forecast of a nation's history." 

There are two phases to the significance 
of the American grasp of the world's mar- 
kets. The obvious phase is the development 
of our own industries which must follow 
such a conquest. If our factories are to be 
great enough to supply our own wants and 
in addition turn out a surplus so large in 
volume and so low in price as to become one 
of the most important factors in the world's 
markets, we can count on an industrial 
growth of which we have heretofore hardly 
dreamed. 

There is another phase to our conquest of 
foreign markets, however, and that is its 
effect upon the other nations of the world. 
If a much larger share of the world's manu- 
facturing is to be done in America, it means 
a lesser share will be done elsewhere. The 
pictures which some enthusiastic observers 
of our foreign trade delight to draw, of a 
time when our exports have so increased and 
our imports so diminished, that we will not 
only make everything we want for ourselves, 
1 08 



" Commercial Invasion " of Europe 

but a very large part of what the world 
wants besides, is a picture which offers 
neither a probable forecast nor a desirable 
result. Naturally we cannot go on selling 
tO' the world a great surplus of food products 
and manufactured articles without buying 
from the world in return. Statistics indi- 
cate that we have for the last two or three 
years been sending Europe annually some- 
thing like $600,000,000 more than we have 
been buying. Europe has not been paying 
for this in gold. During the six years in 
which we built up a surplus foreign trade 
balance of $2,744,000,000, we have received 
from the rest of the world a net balance in 
gold of only $132,000,000. 

One of the most unanswerable of financial 
conundrums is how the world has settled its 
debt to us in the past and is to settle it in 
the future. If these statistics of our foreign 
trade are to be depended upon, it would seem 
as if we had placed the world in our debt in 
the last six years to such an extent that we 
ought to be about ready to foreclose our lien. 
As a matter of fact international finances 
do not show that we have any unusual com- 
mand in the world's money markets ; our 
bankers have no extraordinary credits with 
their foreign correspondents. There seems 
to be no vast accumulation of funds upon 
which we can draw at will, nor is there other 
109 



Btbsmess and Education 

evidence that any large part of this balance 
is still unsettled. 

The question of how a $600,000,000 an- 
nual trade balance is to be settled has been 
a rather interesting puzzle to our financiers ; 
to European finance ministers and bankers, 
to manufacturers and workmen, it is a sub- 
ject of the most intense and immediate 
interest. 

The answer as to how that trade balance 
has so far been settled requires a good deal 
of explanation which must be based on very 
unsatisfactory data. The prediction as to 
how it is to be settled in the future leads to 
most interesting speculation regarding finan- 
cial conditions. 

In the first place the problem is not so 
difficult as it looks on its face. While Gov- 
ernment reports show that we have sold to 
Europe roundly $600,000,000 a year more 
than we have bought, it may be certain that 
the total is considerably below those figures. 
I have been close enough to the making of 
Government customs statistics to know some- 
thing of the difficulties. No fault can be 
found with the thoroughness of the work, 
but it is quite impossible to strike any accur- 
ate international trade balances when the 
figures on one side of the ledger must come 
from importers who have the strongest mo- 
tives for undervaluing imports in their state- 



" Commercial Invasion " of Europe 

ments. I would hardly like to make a guess 
regarding the average percentage of under- 
valuation for all our imports, but it can, at 
the outset of the consideration of this prob- 
lem, be set down as a very large amount. 
Then there are items of great importance of 
which our customs statistics can take no 
note. Our European tourists are generally 
supposed to spend $100,000,000 a year. We 
pay for freights to the owners of foreign 
steamship lines perhaps $75,000,000 more. 
There is a great stream made up of number- 
less small remittances, sent home by pros- 
perous immigrants. And lastly, and most 
important of all, there has been going on a 
repurchase by American investors of our 
securities which have been held in foreign 
markets. This, in the aggregate for the last 
ten years, assumes enormous proportions. 
The best of statisticians can do nothing more 
than guess at the amount, but it has been 
great enough, in the main, to counterbalance 
the excess of our foreign sales over our pur- 
chases, after the totals of travellers' ex- 
penses, ocean freights, and the home contri- 
butions of immigrants have been deducted. 
This return of our securities cannot go on 
forever; indeed, there is pretty good reason 
to believe it cannot go on much longer, for 
the reason that there are now few American 
securities held in Europe to return. 



Business and Education 

It is the practice of the great banks of 
Europe, particularly of Germany, to take 
charge of the securities owned by a vast 
clientage of investors. When in the Impe- 
rial Reichsbank and in the Deutsche Bank in 
Berlin, I was taken into great vaults whose 
walls and floors w^ere covered with cases like 
an immense library, containing stocks and 
bonds belonging to clients of the banks and 
held there for the collection of coupons and 
for safe-keeping. In each of the banks there 
were securities representing some 2,000,000,- 
000 marks. It was interesting to be shown 
great cases of empty shelves which had for- 
merly been set apart for American securities, 
and which now held only here and there 
scattered packages. This was the visible 
evidence of what an examination of invest- 
ors' strong boxes would show in all those 
European countries which have in years 
past found in America the most profitable 
field for investment. 

If our foreign trade is to continue to hold 
the same relation between imports and ex- 
ports that has been ruling for the last few 
years — if we are to go on selling Europe, 
say, $600,000,000 a year more than we buy 
— there will be then, after liberal reductions 
for travellers' expenditures, ocean freights 
(an item which the development of Ameri- 
can shipping may materially decrease), and 
112 



''Commercial Invasion " of Europe 

immigrant remittances, a balance due us of 
$300,000,000 or $400,000,000 a year. How 
is that balance to be paid ? 

That question is, perhaps, the most inter- 
esting of any that can be propounded to-day 
in the field of international finance. I asked 
every finance minister of Europe and the 
head of every imperial bank for an answer 
to it. I found it a question over which they 
had pondered much and never with feelings 
of satisfaction. That Europe cannot pay 
such a balance in gold is obvious ; that we 
would not desire to have it paid in that way 
is clear. The conclusion which I found 
nearly every important European financier 
had already reached was that America will 
sooner or later enter the European security 
markets; that the tables in international in- 
vestments are to be completely turned ; that 
we are to hear no more of the English or 
the German syndicate making investments in 
America, but rather of the American syndi- 
cate becoming a most important factor in the 
foreign investment field. 

The low interest rates which for the most 
part have been ruling in America for several 
years have everywhere attracted attention. 
The belief is growing that New York is to 
become the lowest money market in the 
world. There has been particular interest 
in the advances made in the market price of 

8 113 



Business and Education 

investment securities. The quotations which 
haAX been made for high-grade bonds have 
been the wonder of Europe. AA^hile market 
quotations have shown United States two 
per cent bonds selHng at no, the three per 
cent bonds of the Imperial German Empire 
were quoted at 88, Enghsh consols bearing 
two and three-quarters per cent sold at 93, 
Russian four per cent gold bonds at 96, and 
Italian Government issues at prices netting 
the investor over four per cent. 

These comparisons are anything but pleas- 
ing to European treasury officials. They are 
quick to see, however, that such a compari- 
son is not entirely fair. Our Government 
bonds are free from taxes, and, even more 
important than that, they have a special use 
and value to national banks. A national 
bank may issue circulation against deposits 
of these bonds with the United States Treas- 
ury, or may receive public deposits if it puts 
up Government bonds as security, and so the 
market value of our Government issues, and 
particularly of our two per cent bonds, can- 
not be taken as a measure of the investment 
return which capitalists are willing to take. 
It is a fact, however, that there are over 
$500,000,000 of our Government bonds not 
held by national banks to secure circulation 
or as a basis for public deposits. Those 
$500,000,000 are held solely for investment, 
114 



" Commercial Invasion " of Europe 

and are maintained at market prices which 
net the investor less than one and three- 
quarters per cent, quotations which certainly 
put the credit of this Government far above 
that enjoyed by any other nation. 

There are other evidences that the United 
States is becoming the best market in the 
world for the highest grade of industrial 
securities. First-class railroad bonds, as, for 
example, those of the Pennsylvania or New 
York Central, sell on a basis that nets the 
investor as low a rate as do English railroad 
bonds, while on the Continent the highest 
grade of corporate securities sells at prices to 
realize higher rates of interest to the investor 
than do our best securities. 

That the United States gives promises of 
reaching a position of industrial supremacy 
in the world's trade is acknowledged to-day 
the world over. Undoubtedly we have been 
too flamboyant in some of our claims. The 
industrial world as yet is by no means pros- 
trate at our feet. We have before us a long 
campaign of hard work and intelligent prose- 
cution of every advantage which we have, 
before we reach such a position of industrial 
supremacy as occasional newspaper writers 
on both sides of the Atlantic have given us 
credit for. That we have the foundation 
upon which to build such industrial suprem- 
acy, however, cannot be doubted by any one 

115 



Business and Education 

who is familiar with the resources and abil- 
ities shown in our own industrial field, and 
makes intelligent comparison with the con- 
ditions that obtain abroad. 

It ought clearly to be kept in mind that 
the road to the commercial domination of 
the world is not a clear one for us, and that 
as yet we are a long way from the end of it. 
Evidences of that will be found in studying 
current statistics of our manufactured ex- 
ports. The rapid increase which has been 
going on for a number of years has halted, 
and for the last fiscal year reports show a 
decrease. That decrease can be accounted 
for by the fact that our shipments to Porto 
Rico, Hawaii, and the Philippines are no 
longer counted foreign exports, but it is, 
nevertheless, evident that a halt has come in 
the triumphant march of American manu- 
factures toward European markets. An im- 
portant reason for this is in the very force 
of the success we have made. There have 
been serious inroads made in the prosperity 
of many foreign manufactures by our suc- 
cessful competition. The depression has 
been reflected in lower wages and in de- 
creased purchasing power, and a lower level 
of prices which has reacted on us in common 
with the foreign manufacturers. 

In a good many directions we have much 
to learn in regard to a successful prosecution 
ii6 



" Commercial In'vasion " of Europe 

of foreign trade. The Germans could give 
us valuable lessons. They are strong in two 
particulars — strong in the line of technical 
education, though perhaps not superior to us, 
and strong in commercial training specially 
adapted to the needs of their representatives 
in foreign countries. In this last particular 
we are lamentably weak. We do not learn 
languages readily, and we have been too 
busy with our home affairs to cultivate what 
facility we have. It is a comparatively diffi- 
cult thing to find trained business men, born 
in America, who speak fluently two or more 
Continental languages, and it follows from 
that difficulty that we send commercial rep- 
resentatives to Europe who are under the 
almost hopeless handicap of not speaking 
the language of a country in which they wish 
to do business. Were it not for the coming 
universality of the English language, the 
handicap would be far greater than it is. 
Unfortunately the bad equipment of many 
of the commercial representatives who are 
sent abroad is not confined to their lack of 
knowledge of languages. Frequently they 
have but vague ideas of the commercial 
geography of Europe. They are not at all 
clear as to what particular sections are given 
over to this form of manufacturing or that 
field of production. More than half the fail- 
ures that have come to manufacturers who 
117 



Business and Ediccation 

have tried to extend their foreign business 
have resulted from the lack of qualifications 
in the representatives they sent abroad. 

Another condition that is not favorable 
to our development is one that is being 
thought of a good deal more in Europe 
than at home. We no longer are occupying 
the leading position in scientific investiga- 
tion having special commercial application. 
Many of the most notable discoveries of the 
last few years in commercial chemistry, elec- 
tricity, and other fields of scientific work 
having direct relation with industry have 
been made by foreigners. The X-ray and 
the wireless telegraph are illustrations which 
would occur to every one, but there have 
been numberless important discoveries of 
great value in industrial operations for 
which we are obliged to pay royalty to 
foreign inventors. The United States Gov- 
ernment is to-day paying a royalty to a 
German inventor for the use in the mints 
of a method of refining gold by electrolysis, 
a method which proved much cheaper than 
that which had been in common use in the 
Government and commercial refineries up to 
within a year or two ago. Many such illus- 
trations could be given. 

•One of our particular points of strength 
has in it danger, when carried too far, of 
being an element of decided weakness. We 
ii8 



" Commercial Invasion " of Europe 

have profited greatly by our genius for 
specialization, and our adoption of standard 
models of machines, which can be made in 
great quantities at extremely low cost. In 
holding closely to these standard designs, 
we have frequently lost sight of foreign 
prejudices. Small concessions to those prej- 
udices might have meant large sales, but 
our manufacturers have declined to make 
them. In Moscow, for instance, I talked 
with a merchant who had branches all 
through Siberia, and who bought large con- 
signments of ploughs in America. The 
Russians do not harness their horses as we 
do, and our method of hitching a team to 
a plough is not adapted to their use. This 
merchant found it impossible, however, to 
get our plough manufacturers to adopt the 
slight changes which he suggested, even 
when his orders were for very large quan- 
tities, and he had to have made in Germany 
the type of clevis which his customers de- 
manded and attach it to his importations 
of American ploughs. 

The most important of all obstacles that 
the development of our foreign trade is 
likely to encounter is the same one which 
has proved the most dangerous rock in the 
path of English industry — the growth of 
a spirit in trades-unions which attempts to 
regulate the business of employers in other 
119 



Business and Education 

matters than those relating to wages and 
hours of labor. I believe the decline of 
English industry can be attributed to the 
success of labor organizations in restricting 
the amount of work a man may be per- 
mitted to do, more than to any other single 
cause. We have encountered that spirit too 
frequently in our own labor field, and it is 
one which, if successfully persisted in, will 
cut the ground of advantage from under 
our manufacturers quicker than anything 
else I know of. 

It is generally understood that our natural 
resources are in many important particulars 
unparalleled. We patriotically believe that 
the ability of the average American work- 
man is superior to that of his competitor in 
other countries. We are all confident that 
our form of government offers the solidest 
foundation upon which to build national 
prosperity. Our industries are helped rather 
than hampered by our system of federal tax- 
ation, while an examination of the incidence 
of taxation in nearly every country abroad 
shows that a most depressing influence on 
industries is exerted by the national tax- 
gatherers. 

There are other facts in our favor not 
quite so generally understood. We have, 
for instance, a financial system, particularly 

120 



*' Commercial Invasion " of Europe 

in the relation of our banks to every-day 
business transactions, which gives us as 
much of an advantage over most of the 
Continental countries as would some great 
labor-saving machine. The American busi- 
ness m.an whose operations are even of the 
most modest extent is certain to have a bank 
account. He pays his bills with checks or 
drafts. When he wishes to extend his opera- 
tions he does not borrow actual currency, 
but he borrows bank credit. In all his trans- 
actions he has to aid him the most fully 
developed credit system to be found any- 
where in the world except in Great Britain. 

It is almost beyond belief how little de- 
velopment there has been in this direction 
in some of the foreign countries. A bank 
check is looked upon with suspicion in Italy. 
Practically no small tradesmen would take 
a check, and none of them keep a bank 
account. It was still more surprising to me 
to find that such a statement would be 
almost literally true of Paris itself. I was 
studying the mechanism of the Bank of 
France under the guidance of one of the 
officers. We went into one great room in 
the old building in which there were 200 
desks enclosed in wire cages, all empty at 
the moment. I asked what these were for. 

" These cages are for our city collectors," 
I was told. '' When a small merchant bor- 
121 



Business and Education 

rows from the Bank of France, he does not, 
as with you in America, borrow a bank 
credit and have his loan merely added to his 
balance on the books of the bank. With us 
the merchant, when he makes a loan, gets 
the actual money and takes it away. He 
probably has no bank account with us. 
He writes no checks. AMien the loan is 
due he does not, as would be the case in 
your banks, come in and pay his indebted- 
ness with a check ; instead of that we send 
a collector to him, and that collector is re- 
paid the loan in actual currency. Two hun- 
dred men start out from the Bank of France 
CA^ery morning to collect matured loans. 
Several days each month it is necessary to 
send out 400 men, and on the first and the 
fifteenth of each month 600 collectors go 
out." 

These collectors were uniformed men 
carrying leather pouches in which they have 
the matured notes and which are later filled 
with currency as the collections are made 
from the bank's borrowers. 

I stood at the paying-teller's desk as I 
went farther along in my tour of the Bank 
of France. As I halted there the man who 
happened to be at the window at the mo- 
ment presented a check for 50,000 francs. 
The money was counted out and handed 
over to him, stored away in a big wallet, 
122 



*' Commercial Invasion " of Europe 

and he passed on. I asked if it were not 
unusual for a man to draw out so much 
currency, and was told that it was not. It 
was but another illustration of how unde- 
veloped is the banking system of Conti- 
nental Europe in its uses by the general 
public. 

A story that was told me on the highest 
authority in Vienna sounds ludicrously in- 
credible, but it is true. The Austrian Gov- 
ernment bought a telephone line from an 
English company. There was a payment 
of 1,000,000 guldens (about $400,000) to 
be made by the cabinet officer corresponding 
to our Secretary of the Interior. The repre- 
sentative of the English company wished to 
be paid by merely receiving a credit at the 
Austro-Hungarian State Bank. The minis- 
ter regretted that there was no precedent for 
such a method and insisted on sending to 
the bank, which is the government's fiscal 
agent, bringing the actual money to his 
office, and counting it out to the English- 
man, who in turn took it back to the same 
bank, where it was again counted and put 
back in the vault from which it had been 
taken an hour before. 

As one gets farther east the methods of 
banking become more primitive. The Rus- 
sian peasant frequently becomes a man of 
very considerable property, but he is apt to 
123 



Business and Education 

cling to his early financial method of bank- 
ing in his boots. He wears boots with high 
felt tops, and the leg of one is the receiving- 
teller's cage, and the top of the other is 
the paying-teller's. He will start out in the 
morning with his right boot-leg full of 
money. His day's payments are made out 
of that boot, and his receipts are deposited 
in the other. At night he checks up on his 
day's financial operations and strikes a 
balance. 

The banking methods of Continental Eu- 
rope are cumbersome and time-consuming, 
and the people generally have learned but 
the first lessons in the uses of credit ma- 
chinery. That forms a handicap upon in- 
dustry that is just as real as that caused 
by their persistence in using out-of-date 
machines and methods of manufacture which 
we have long ago abandoned as slow-going 
and expensive. 

One of the important factors in the 
strength of our industrial position is the un- 
questioned superiority in our transportation 
system. If one has fresh in mind the picture 
of our luxurious trains, mammoth engines, 
and, more important still, our standard fifty- 
ton freight-cars, it makes the Europeans 
seem like amateurs in the science of trans- 
portation when we see their toy cars, small 
locomotives, and generally slow-going ad- 
124 



" Commercial In'vasion " of Europe 

ministration. If one looked into the matter 
with the eye of an expert, studying the unit 
of cost, the freight charges per ton per mile, 
or the mileage rate for passenger service, 
and made comparative statistics of the ton- 
nage of freight-trains and the cost of moving 
them, he would discover a startling lack of 
efficiency, both in Great Britain and on the 
Continent. Perhaps it is not quite fair to 
make comparisons of the average cost of 
freight traffic per ton per mile in America 
and in Europe, because the average haul is 
much shorter there, and terminal expenses 
of a haul are practically the same whatever 
its length. The average charge per ton per 
mile on all American railroads for all classes 
of freight is now less than three-quarters of 
a cent. If we take the statistics of the East- 
ern trunk lines alone, that figure would be 
cut to about one-half cent per ton per mile. 
It compares with 2.4 in Great Britain, 2.2 in 
Prance, 1.6 in Germany, and 2.4 in Russia. 
One of the most remarkable illustrations of 
the failure of European managers of indus- 
tries to keep pace with the times is to be 
found in a comparison of the efficiency of 
their railroads with ours. English railroads 
charge three times as much to move a ton 
of freight as it can be moved for in America. 
English railroad managers have failed to 
grasp the economies that are made possible 
125 



Business and Education 

by heavy traffic, by the use of engines of 
enormous capacity and freight-cars that will 
carry fifty tons. But if the English railroads 
have failed to keep pace v^ith ours, what can 
be said of most of the Continental roads? 
Short trains with pygmy freight-cars, each 
car holding only eight tons, make clear to 
any layman the handicap which high trans- 
portation charges have laid on industry all 
over Europe. 

In the little town of Abo, in Finland, I was 
waiting one day for a steamer to go to 
Stockholm. In strolling about the town I 
ran across another American, I learned that 
he was the representative of a great engine 
manufactory, and that he had been covering 
Europe from Spain to Russia. He had been 
able to sell his engines in competition both 
with the domestic manufacturers and v/ith the 
makers in Great Britain and Germany, who 
had before practically controlled the trade. 
I asked him to analyze for me the condi- 
tions that enabled him to come into these 
markets and sell in successful competition 
in spite of customs duties, in spite of 4,000 
or 5,000 miles of transportation charges, and 
in spite of the fact that his factory paid 
workmen average wages two or three times 
as large as were paid by his competitors. 

" Our success in coming into this field," 
he said, " is very largely due to what in our 
126 



" Commercial Invasion " of Europe 

manufacturing parlance we call the making 
of ' standards.' We believe we know how 
to make a type of engine which will give 
the maximum efficiency for a certain class 
of work. We develop our standard type 
and then we stick to it. We are enabled to 
manufacture an enormous number of en- 
gines all exactly alike because we have in 
our home market an enormous field. The 
American public has been taught that a 
builder of engines knows better how to de- 
sign an engine than does the individual who 
only occasionally buys one. Our best manu- 
facturers absolutely refuse to vary from their 
standards. In making a great number of 
engines exactly alike we can turn out work 
at a price that is simply beyond the possible 
competition of the ordinary European maker. 
Our labor-saving machines largely compen- 
sate for the higher wages we pay. The Eng- 
lish and German manufacturers are harassed 
by consulting mechanical engineers. A man 
who wants to buy an engine employs an in- 
dependent consulting engineer. The engi- 
neer invariably feels that he must earn his 
fee by suggesting a change. If a dynamo is 
adjusted to make 112 revolutions a minute 
he wants an engine built that will turn it 113. 
The result is that English and German manu- 
facturers make an endless number of types. 
What is more, they cannot get away from 
127 



Business and Education 

the thraldom that they are in, and adopt our 
system of standard types, because they have 
not the great, broad, homogeneous market 
which America offers to its own manufac- 
turers. I doubt if our manufacturers appre- 
ciate the great advantage w^hich they have in 
this home market, where the inhabitants, 
from the Atlantic to the Pacific, are very 
much the same kind of people, with very 
much the same needs and desires. In Europe 
every manufacturer has a sharply circum- 
scribed field. He is met by new tariffs and 
new tongues only a short distance from 
home in whatever direction he goes. The 
type of article which can be sold in one dis- 
trict may find no market in another close by. 
With us the man in Los Angeles wears just 
the same kind of hat as the man in Bos- 
ton, and the people through all that stretch 
of 3,000 miles are dressed the same, and 
buy, generally speaking, similar commodities. 
This broad basis of our own unparalleled 
market, which permits a manufacturer to 
successfully work out a standard article, and 
then produce an enormous quantity of that 
exact type, is the most secure basis upon 
which to build a foreign trade. We alone 
have that advantage. No European manu- 
facturer can successfully follow in our lead." 

When M. De Witte said that militarism 
128 



" Commercial Invasion ** of Europe 

Is the nightmare and the ruin of every 
finance minister, he spoke a truth that has 
an apphcation to this question of industrial 
rivalry. The evidence of militarism is one 
of the most obvious things in Europe. In 
Russia one is never out of sight of a line 
of brown-coated, stolid-faced soldiers. A 
tremendously effective display of military 
strength is everywhere encountered in Ger- 
many. One is impressed by the cost of 
the brave attempts of poor Italy to keep up 
military appearances in the company of first- 
class powers, a company to which she has 
not the natural right to aspire. No one can 
see this universal display without contrast- 
ing its cost and the burden which that cost 
throws on industry, with the comparative 
freedom from that weight in the United 
States. 

Europe spends annually for military and 
naval estabhshment $1,380,000,000. With 
our army on something of a war footing, 
as it is at present, we have only spent 
in the last year for the army and navy 
$205,000,000. 

Marked as is this difference of cost, it by 
no means measures the real weight which 
militarism puts on the European powers; it 
is not alone that Europe spends $1,380,000,- 
000 a year to maintain the military establish- 
ment, but very much more important, from 
9 129 



Business and Education 

the industrial standpoint, is the fact that 
Europe takes out of her productive capacity 
4,000,000 men. These milhons are just in 
the fulness of their youth and would be a 
tremendous factor in industrial production. 
The male industrial population of Europe, 
men between the ages of twenty and sixty, 
may be estimated at about 100,000,000. To 
withdraw from productive industry for mili- 
tary purposes 4,000,000 men means a loss of 
four per cent, and that is in addition to the 
taxes necessary to raise the $1,380,000,000 
for the annual maintenance of the military 
establishments. When we perceive the full 
weight which militarism has hung upon the 
neck of industry in Europe, we see another 
enormous handicap which is acting year after 
year in our favor. 

In the course of a conversation with one 
of the most eminent of European financiers, 
a man who has added the distinction of 
notable public service to a business career 
which made his name familiar in every finan- 
cial centre, I said that one of the things 
which had occurred to me in my observation 
of European affairs, after seeing the tre- 
mendous effect upon England herself and 
through her upon all the countries of Europe 
of the expenses of the Transvaal War, was 
that if a small war under modern conditions 
was to cost so much as the Transvaal War 
130 



" Commercial In'vasion " of Europe 

had cost, and was to produce such an effect 
upon industry and commercial conditions 
throughout Europe, no great war would in 
the future be possible. 

'' You are wrong," he said. 

" That is not clear to me," I replied. 
" Let us take Russia for illustration. Sup- 
pose Russia was to begin a great war. 
Where is she to get the money? " 

" Let me tell you a little of a war of which 
I know something," he said. " I happen to 
control nearly all the railways of Turkey. 
Turkey had a war with Greece. Now let us 
see how she paid the expenses. She raised 
an army; she paid her army nothing. She 
transported that army of 60,000 men from 
the interior of Asia Minor to the Greek 
border. How did she do that? She com- 
manded our railroads to carry them. Did 
we carry them? Yes. Have we any pay 
for it? No; nor will we ever have. So 
she paid nothing for the transportation of 
her army. Then she had to arm it. What 
did she do? She bought arms in Germany. 
Has she paid for them ? No. So she raised 
her army, transported it, and armed it. The 
whole cost of that campaign, in fact, was 
managed without any real expenditure of 
money. 

" So it would be with Russia. I was once 
in the interior of Persia. I met there, 2,000 
131 



Busmess and Education 

miles from the sea, two German tramps. 
I asked them where they were going. They 
said : ' The Pacific Ocean is off here some- 
where, and we are making our way toward 
the Pacific Ocean.' I asked them, ' What 
can you do ? ' One said, ' I can play a trom- 
bone.' The other said: 'I can weave straw 
baskets.' ' Well,' I said, ' how have you got 
here ? ' ' We can walk, and the people are 
good,' w*as the answer. 

" So it is with the army. They can walk, 
and the people are good. If the people are 
not good, the army gets its provisions any 
way. The expenses of a war in Russia, so 
long as it was in Russia, would be to that 
nation very small, and the financial situation 
is not a commanding condition in any con- 
siderations of peace or war." 

" What is the future of the world with 
respect to America?" I asked. "If Amer- 
ica is to go on in anything like the way she 
has been going in the last three or four years 
with her foreign trade — if America is to 
sell to Europe $600,000,000 a year more 
than she buys — what is to be the outcome?" 

" Something always happens, and some- 
thing- will happen here. I do not know what 
it is ; I cannot foresee it. America so far 
seems to be making no mistake, but some- 
thing will happen. Things cannot go on as 
they are going. It may be that it is your 
132 



" Commercial Invasion " of Europe 

colonial policy. At present there are 4,000,- 
000 soldiers in Europe, the best of her young 
manhood, who not only are taken away from 
production, but are paid for being taken 
away from production, and Europe is paying 
six milliards a year to support them. That 
six milliards does not measure the cost. It is 
that, plus the loss to production, which ham- 
pers commercial Europe, and it is there that 
you have the great advantage. But what of 
your future ? We are glad to see you going 
into the Philippines. We will welcome the 
time if you are going to measure strength 
with us as a military power. Commercially 
you are supreme, but if it comes to a test of 
military strength, if you are going to weight 
yourselves with the militarism which is the 
burden of Europe, then we can see some 
light." 

I asked if the tendency in Europe is in the 
direction of a reduction of military forces. 
" Not at all," he said. " France hates Eng- 
land, and England hates France; Germany 
detests France, and France detests Germany ; 
Russia hates Germany, and Germany hates 
Russia. There it is all around. There is no 
hope of reduction. It is impossible. Eng- 
land has hoped to come to some understand- 
ing with Russia. I spent some time at the 
home of Mr. Chamberlain not long ago, and 
there was a strong hope in his mind that 



Business and Education 

England could come to a better understand- 
ing with Russia. But it is impossible, just 
as it is impossible for France and Germany 
to come to an arrangement. We are no 
longer afraid of France. We beat her from 
a military standpoint. We have beaten her 
now from a commercial standpoint, and 
there is nothing else. Commercially we 
hold a pretty strong position with France. 
After the war we had a treaty which pro- 
vided that we should be equal to the most 
favored nation. France began making spe- 
cial treaties, but as soon as she concluded 
one we took a place equally favored, and 
strengthened our commercial position. We 
have beaten her commercially, and I see 
nothing to fear from France." 

I asked what he thought of the great con- 
solidations of America, such as the steel 
combinations. 

" An autocracy is good or bad according 
to the autocrat. If he is a good autocrat it 
is the very best thing possible. If he is a 
bad autocrat, it is the worst. Who is going 
to control your trusts? That is the whole 
question. It is true you have managed your 
Standard Oil in a way that is creditable, and 
that has brought satisfaction to the country. 
The Sugar trust has been in a measure man- 
aged as well. But what assurance have we 
that this great Steel trust is to be managed so 
134 



" Commercial Invasion " of Europe 

well ? That is the whole problem. It is the 
question of men. Undoubtedly it makes you 
a much more formidable competitor, because 
it consolidates your interests. But you are 
a young nation. You are a young people. 
You are young in this business of consolida- 
tion. What has been the world's history 
when you put great power into the hands of 
young men ? It has sometimes been abused. 
We shall watch with great interest the course 
with you in this enormous combination." 

And that is what all Europe is doing — 
watching with the keenest interest our course 
as it affects our position in the world's in- 
dustrial contest. 



II. Italy, Austria, Germany 

Industrially it is no longer the Old World. 
It is New Europe and Old America! It is 
New Europe, a land of undeveloped possi- 
bilities, abounding in opportunity for keen 
captains of industry. It is mature America, 
the exemplar of modern industrial methods, 
perfected mechanical ideas, and ripe eco- 
nomic policy. 

This conception of a new Europe, looking 
toward mature America for the best illustra- 
tions of industrial development, was novel 
enough when I first encountered it, but it 
135 



Business and Education 

becomes familiar as one goes from country 
to country and sees field after field rich in 
opportunities for the introduction of better 
methods, the application of better mechanical 
ideas, and the planting of more correct eco- 
nomic policies. It was in Rome that I first 
met this thought of a new Europe. I was 
told that Italy was but thirty years old, that 
the present economic life dates back only to 
1870, and that the modern Roman is to-day 
an industrial pioneer in a virgin country. 
Such a thought applied to almost the oldest 
European civilization is especially striking, 
but every other country of Europe offers 
illustrations of the truth of the paradox. 
We not only find that Italy has suddenly 
awakened to the possibilities of conserving 
the force of her enormous water-power, and 
is beginning a great movement to turn into 
electrical energy numberless cascades and 
rapids, but an examination of the industrial 
side of every other nation shows much that 
is still unhewn and unwrought. Austria has 
just formulated a legislative plan for a great 
network of canals which will cost hundreds 
of millions of florins and revolutionize the 
transportation of the empire. Germany, 
from this industrial point of view, is a pic- 
ture of youth — new factories on every 
hand, new development everywhere, and the 
spirit of the industrial pioneer in all the 
136 



" Commercial Invasion " of Europe 

people. England, wedded as she is to in- 
dustrial precedent, turning instinctively from 
methods that mean change, holding close to 
the ways that were the ways of the fathers, 
presents a field unploughed when looked at 
from the point of view of the opportunity 
offered for the introduction of the best in- 
dustrial methods and the most economical 
mechanical equipment. France, with her 
satisfaction over her minute subdivision of 
ownership and her contentment with small 
things, offers virgin fields for the exploita- 
tion of modern ideas of specialization, com- 
bination, and community of interests. Vast 
Russia, enormous in extent and population, 
is immaturity itself, new industrially beyond 
anything America has known for two 
generations. 

When we see that Europe is an industrial 
field, still undeveloped; that in many direc- 
tions the methods and practices current in 
industrial life are as wasteful and expensive 
as are operations in some new country, we 
perceive at once that such a condition has 
two important relations to our own industrial 
life. If our foreign competitors are not 
making the most of their opportunities, their 
time, and their labor, gauged by our stand- 
ards, it means that they are under a handicap 
in competition with our industrial output, 
and so long as our methods are superior to 
137 



Business and Education 

the methods in vogue in Europe we may 
look for continued advantage in interna- 
tional competition. 

The idea of an undeveloped Europe is of 
decided interest to us, however, from another 
point of view. With such a field for devel- 
opment as we have had at home we have 
become experts in seeing new opportunities, 
and have become quick to disregard prece- 
dent and long-established conditions, and to 
perceive the advantages which may come 
from new combinations, modern equipment, 
and specialized work. An undeveloped Eu- 
rope, therefore, offers a field in which this 
special genius of ours may profitably exploit 
some of the same industrial methods and 
policies which have proven so successful at 
home. This is not a mere theory. There 
are already notable illustrations of success in 
exactly that sort of thing, and there are 
promises of many more successes to come. 
Our great electrical companies have estab- 
lished works in England, France, Germany, 
and Russia. There are tool-works in Ger- 
many equipped with complete sets of Amer- 
ican models, American machines, and 
Yankee foremen. Important portions of 
London interurban transportation systems 
have come into American hands and are 
feeling the vivifying influence of American 
ideas. The electric street-railroads and 
138 



" Commercial Irwasion " of Europe 

lighting-plants in a number of important 
cities of France are controlled by American 
interests, and the transportation system of 
Paris itself is a field which is tempting close 
investigation on behalf of American capital. 
Some attention has heretofore been drawn 
to the extraordinary balance in America's 
favor which the last half dozen years of 
foreign trade has built up. The settlement 
by Europe of these annual trade balances is 
a problem which has been outlined, and at- 
tention has been called to the opinion of 
many European and not a few American 
financiers that ultimately the settlement of 
this trade balance must be effected by Amer- 
ica investing in European interests and 
securities. A few years ago it would have 
sounded absurd to have talked of the possi- 
bility of American capital seeking investment 
in Europe. The idea is hardly yet so fa- 
miliar as to make it seem reasonable. It is 
hard to believe that America, with her end- 
less opportunities, unparalleled richness of 
natural resources, and admitted pre-eminence 
in industrial methods, should not continue 
for a long time to be a more profitable 
field for the investment of capital than can 
possibly be found in Europe. For us the 
disadvantages of distance, of foreign laws 
and customs, and of competition with great 
funds of accumulated capital have heretofore 
139 



Business and Education 

seemed to preclude any possibility of our 
becoming investors across the Atlantic. But 
this annual trade balance which we have been 
piling up has been so extraordinary in itself 
that it seems likely to lead to other unusual 
features; and among those it now seems 
easily possible that we shall see American 
capital become an important factor in Euro- 
pean fields. 

Naturally, few Americans have gone to 
Europe to look for investment opportunities. 
Travellers' descriptions have been endless, 
but few of them have told us of European 
conditions from an American investor's point 
of view. We have in times past had a good 
many financiers go abroad to convince Euro- 
pean capitalists of the credit and good pros- 
pects of enterprises that we were developing 
at home, but it is only within the last few 
months that Americans have been going 
abroad to measure investment possibilities, 
to investigate offerings of securities, and to 
look into opportunities for profit in new 
developments, new combinations, and the 
application of new methods. 

If a trade balance of some hundreds of 
millions of dollars is to be settled by our 
taking European securities, it becomes de- 
cidedly interesting for us to begin to study, 
from an investor's point of view, the eco- 
nomic conditions prevailing there. It is 
140 



" Commercial Invasion " of Europe 

from such a point of view that I intend 
to present some of the points that appealed 
to me as particularly interesting in several 
of the European countries. 

The countries forming the Triple Alli- 
ance — Germany, Austria - Hungary, and 
Italy — offer the most widely divergent in- 
dustrial conditions ; but because of politi- 
cal bonds there has been a close relation 
between the financial and commercial inter- 
ests of the three nations, and an interchange 
of capital, so they have come to form a 
natural industrial group as well as a political 
alliance. 

Of all the European powers the industrial 
newness of Italy strikes one most sharply. 
That is true both as to actual lack of devel- 
opment, and from the fact that one natu- 
rally associates Roman surroundings with 
age. We are inclined to think of Italy as 
a land of cathedrals and art-galleries, blue 
skies and sunshine, where the rich go for 
pleasure, and the poor stay to beg; and the 
industrial importance of the country is not 
a subject that many of our own people have 
considered deeply. While Italy abounds in 
glorious history, and is a land of great mem- 
ories, it has in modern times held a com- 
paratively small place in the industrial history 
of the world. Developments are going on 
there now, however, particularly in the north, 
141 



Business and Education 

which promise to bring the measure of 
Italy's industrial importance much higher up 
in the column of totals. Southern Italy is 
hopelessly handicapped for a long time to 
come by the system of land-ownership, the 
hardships of taxes, the extreme poverty of 
the people, and their consequent deteriora- 
tion from an industrial point of view, and 
by excessive illiteracy. The elementary and 
secondary schools there are incredibly bad; 
teaching is the least honored of the learned 
professions. Conditions are far better in the 
north. There are found small individual 
ownership of land, and an independence and 
thrift, in striking contrast to the south. The 
people take more readily to industrial pur- 
suits, too, and there is really striking prog- 
ress in the recent upbuilding of m.any 
industries. 

Prior to 1871, when church and state Avere 
separated, and the present political regime 
inaugurated, the industries of Italy were 
comparatively insignificant, viewed from the 
standpoint of international trade. The pop- 
ulation was largely given up to agriculture. 
In the thirty years that have elapsed there 
has been notable industrial growth, and that 
growth is now going forward at a steadily 
accelerated pace. One-third of all the silk 
used in the world comes from Italy. Nearly 
as great progress has been made in the 
142 



" Commercial Invasion " of Europe 

weaving and spinning of the silk cloth as 
in the production of raw silk. In three years 
the exports of woven silk have risen from 
$65,000,000 to $100,000,000. Great prog- 
ress has also been made in cotton-weaving. 
The industry did not exist twenty-five years 
ago, while now it employs 80,000 men 
and produces annually an output valued at 
$60,000,000. 

The cheap labor of Italy and its compara- 
tive efficiency have attracted English manu- 
facturers. Two or three of the best known 
of the English glove-makers have large fac- 
tories in Naples. I saw gloves there being 
turned out by the thousands, stamped with 
the imprint of well-known English names, 
and completed by the addition of buttons 
bearing the legend " Made in England " — 
a bit of commercial artifice that must be 
confusing to customs officials when they 
later attempt to classify England's exports. 
Endless cartons of beautifully fashioned arti- 
ficial flowers, believed by the people who 
buy them to have been created by the deft 
touch of Parisian fingers, are likewise made 
in Naples, and later have 100 per cent or 
more added to their value by having Erench 
names pasted on the boxes. 

The industrial development of Italy has 
two distressing impediments. One is the 
high rate of taxes, the other the high cost 
143 



Business and Education 

of fuel. In army-ridden Europe there Is 
no other country where the per capita cost 
of maintaining the miHtary estabhshment is 
so great as it is in Italy, and no other coun- 
try where the people are so little able to 
afford the glories of armies in the field and 
of fleets at sea. Italy as a nation is out of 
her rank in attempting to maintain a first- 
class war footing, and, until her military ex- 
penditures are reduced to a point commen- 
surate with her population and wealth the 
military burden will be an almost insur- 
mountable obstacle to the desire of her com- 
mercial citizens to have the country take 
foremost rank as a producing nation. 

A hindrance to industrial growth, second 
in importance to that of the demand of the 
war-chests, is the lack of coal. All the coal 
used on the railroads and in the factories 
is shipped from other countries, and Italy's 
trade balance is reduced each year by the 
full amount of her fuel bill. This not only 
has a most unfavorable effect on her balance 
of trade, but it means that the cost of fuel 
in Italy is very much higher than is the cost 
in any of the countries with which she must 
compete industrially. At Italian seaports 
the price of coal ranges from $7 to $10 a 
ton. In Milan manufacturers pay $12 a ton 
for coal for which German manufacturers 
pay $6, which the English manufacturer can 
144 



" Commercial In'vasion " of Europe 

get for $4, and which is laid down at many 
factories in the United States at $2.50 a 
ton. There is only one locality in the king- 
dom where coal is mined, and the output is 
small and the quality poor. 

There seems to be more prospect ahead 
for Italian industries being relieved from 
the burden of high fuel charges than from 
the weight of excessive military taxes. Italy 
abounds in water-power, and there is just 
now a great awakening in regard to the 
development of that latent energy. Manu- 
facturers are coming to understand that 
future development will most likely be 
reached along lines of securing power at 
low cost. Italy is remarkably favored with 
water-power. To the north are the Alps, 
and the Apennines run far south along the 
centre of the Peninsula. The country is an 
immense watershed, down which innumer- 
able streams flow, none of them very large, 
but all falling a great distance, and develop- 
ing in their descent a prodigious amount of 
power. Engineers who have made a study 
of the situation estimate that the rivers of 
Italy can be made to furnish more than 
2,500,000 horse-power, which has a value 
equivalent to coal now costing $125,000,000. 
More than 1000 companies have been organ- 
ized in the last few years to erect power 
plants along these streams. 
10 145 



Business and Education 

Italy is lacking in any large fund of cap- 
ital available for aiding her industrial devel- 
opment. Investment in stock companies has 
not yet become popular. The Italian is ex- 
tremely distrustful in finance; his distrust 
has a fundamental basis in a fear even of 
banks and bank accounts. He wants to keep 
his property out of the sight of a tax- 
gatherer, and he does not put great depend- 
ence in the commercial signature of his 
fellow. The use of bank-checks in current 
daily business is almost unknown. There 
are large savings-bank deposits, but the 
people have not reached a point in com- 
mercial development where they will give 
their capital an effective aggregate by in- 
vestment in corporate securities. Before 
Italy cut loose from France and joined her 
political fortunes with Austria and Ger- 
many, French capital had looked with favor 
upon Italian enterprises. After the political 
changes of 1887, the Italian exports to 
France dropped from $81,000,000 to $34,- 
000,000, and have continued at about the 
lower figure, and French capital ceased to 
flow into Italian investments. That has in 
a measure been compensated for by the in- 
terest that German capital has taken in 
financial operations, but Germany's own in- 
dustrial development went on so rapidly and 
has now come to so many misfortunes that 
146 



" Commercial Invasion " of Europe 

the present offering of German capital is 
much restricted. 

Italy would look with great favor upon 
any project to interest American capitalists 
in her industrial development, and undoubt- 
edly a field is there offered which will bear 
some inspection at the hands of our finan- 
ciers. In certain lines there is no possibility 
of Italy successfully competing with the 
United States, England, and Germany. The 
lack of coal will leave the country out of 
the race in iron and steel manufactures. In 
those lines of industry, however, where cheap 
labor is required, and where the cost of raw 
material is favorable, there promises to be 
much success. The labor is skilful and 
effective, and manufacturers are not slow 
in accepting mechanical improvements and 
adopting modern methods. The fact that 
the country is not on a gold basis is a draw- 
back. Italian financiers are anxious to estab- 
lish the gold standard. The Finance Min- 
ister, Signor Chimirri, told me that he had 
strong hopes of success in that direction. 
It is recognized that the present uncertainty 
regarding the value of the Italian money 
standard acts as a serious deterrent to the 
investment of foreign capital in the country. 
An excessive issue of bank-notes, a survival 
of former days, is the main reason for the 
depreciation of the currency, but the Gov- 
147 



Business and Education 

ernment now has a definite programme for 
reducing the bank-note circulation by a fixed 
amount each year. Pohtical conditions are 
in many respects most unsatisfactory. In 
many sections there is distressing- poverty; 
and the high price for food, made necessary 
by heavy taxation, brings dire hardships into 
the Hves of the common people. It has been 
estimated that the average Italian laborer 
has 310 pounds of cereal food during the 
year, which is twenty-five per cent less than 
is given the inmate of an English work- 
house. Socialism is rampant, and the Gov- 
ernment must be constantly on the alert to 
prevent uprising. Judging by the precau- 
tions taken, there are sections of the country 
at all times on the point of an outbreak 
against constituted authority, inspired by no 
very definite political reasons and due more 
to the desperation of hunger than to ideas 
in political opposition to the Government. 
The people are under the domination of an 
army which takes not only the best blood 
of the country, but imposes an almost un- 
bearable weight of taxation on those left to 
carry the burden. The army and navy alone 
absorb six per cent of the country's income ; 
or in other words, out of every $100 earned 
in Italy, $6 is taken by the Government in 
support of the military establishment. 
The social and political unrest, the bur- 
148 



" Commercial Invasion " of Europe 

dens of taxation, and the uncertain money 
standard must cause foreign capital to hesi- 
tate even before opportunities that may look 
alluring, while those same impediments, to- 
gether with a lack of some of the most 
essential raw materials and of home capital, 
must make the further industrial develop- 
ment of the country slow when measured by 
our standards. The United States has no 
need to fear Italian competition in the 
world's markets in any of the great staples 
of our manufactures. There is, however, 
easy possibility of greatly increasing our 
sales to Italy, particularly if her industrial 
development goes forward along lines which 
permit her to sell to us some commodities 
which we can better buy than produce. 

In the closing days of his public career 
Prince Bismarck found occasion to say, 
" Poor Austria, I fear her days are num- 
bered." Let us hope the Chancellor did not 
speak prophetically, but he certainly spoke 
with profound perception of the cross-drifts 
which are the despair of the statesmen of 
Austria-Hungary. One of the most restive, 
bewildering, and bewildered state-unions in 
existence is the Dual Monarchy, a country 
at once one and divided, a people ready to 
overturn their government for a language 
preference, a country of twenty tongues, 
149 



Business and Education 

each one berating the other, a country the 
one-half of which puts trade barriers in the 
way of the other half; Hungary jealous of 
Austria, and Austria unable to forgive Hun- 
gary its superior prosperity. The monarchy 
is made up of conglomerate peoples, unable 
to act and think together, and habitually 
threatening to act and think apart. In no 
other country of Europe are industrial condi- 
tions so complicated by politics, hereditary 
jealousies, class distinctions, church influ- 
ences, and a babel of tongues that cannot 
be harmonized either in speech or senti- 
ments. For the present the personality of 
the venerable Franz Joseph holds together 
these varied elements. What will come to 
the Dual Monarchy after Franz Joseph is 
a question never out of the mind of any 
European statesman. 

It is in the midst of this political turmoil 
that the idea was born for a European tariff 
alliance against xA^merica. It is here that one 
finds the keenest antagonism toward com- 
mercial America, and the most earnest efforts 
to block by legislation a commercial invasion 
that could not be met by methods of superior 
industrial merit. 

The president of the Chamber of Com- 
merce at Vienna explained to me the 
Austrian position on this matter of tariff 
discrimination against the United States. 



" Commercial Invasion " of Europe 

" America is destined, beyond question, to 
be a most powerful country," said he. " We 
regard it as the most dangerous competitor 
in all our markets. The marrow and bone 
of her prosperity we believe to be her pro- 
tective tariff, which has enabled her to build 
up her industries and develop her resources. 
The Steel Trust shows us what we have to 
expect in the future. We shall have to 
adopt the same policy, and we will do it. 
Whenever we discover that American com- 
petition is hurting any of our industries, we 
shall certainly shut out America if we can. 
If we do not succeed in making a satisfac- 
tory treaty with the United States, we shall 
look to Russia and Australia for the raw 
materials we may need, for to those coun- 
tries we shall be able to sell the products of 
our industry." 

These words must not be considered as 
the expression of a private citizen, but as 
having official character, for the Chamber 
of Commerce is an official advisory insti- 
tution for the aid of the government in the 
preparation of legislation. The best judg- 
ment in Europe and America is, I believe, 
pretty well agreed on the futility of a Euro- 
pean tariff alliance against the United States. 
Not one of our ambassadors or ministers 
believes it is a feasible programme for the 
European States, no matter how antagon- 
151 



Business and Education 

istic European statesmen may become toward 
us on account of our commercial success in 
foreign fields. I found no important banker 
or manufacturer who thought it probable 
that the conflicting interests of the A^arious 
States could be brought to any harmonious 
point of view from Avhich to formulate such 
a tariff. Undoubtedly it is a dream in the 
minds of many people who have not a clear 
idea of the difficulties involved, but certainly 
the best judgment of the tAvo continents 
seems against the feasibility of the idea. 
Conflicting interests can ncA^er be harmon- 
ized so that an agreement Avill be reached 
among the nations. Indeed, conflicting in- 
terests in the Dual Alonarchy itself can prob- 
ably never be harmonized so as to support 
Count GoluchoAvski's programme. Austria 
is a manufacturing country. Her people 
have highly developed artistic faculties, and 
a deftness and skill Avhich make her a leader 
in certain of the finer lines of production, 
and she has some standing as a producer 
of iron, steel, and machinery. Hungary, on 
the other hand, is as yet almost altogether 
an agricultural country. Austria Avants high 
tarifl: and cheap food; Hungary Avould like 
to exclude foreign food and have the advan- 
tage of cheap foreign manufactures. The 
tAvo parts of the monarchy are held to- 
gether by a slender thread, and the fretful 
152 



" Commercial Invasion " of Europe 

people that compose the two nations will 
only agree that that bond may hold them 
for ten years at a time. The Ausgleich 
expired in 1897, and for four years the 
two States have wrangled over its renewal, 
industry and commerce being all that time 
greatly perturbed. 

If we look at Austria as a competitor for 
the world's trade, it is easy to see that there 
is small occasion for us to be alarmed. The 
obstacles which political conditions set up in 
the way of industrial progress are almost in- 
surmountable. Everywhere in Europe there 
is found a weight of taxes bearing on in- 
dustry much greater than with us. In Aus- 
tria this is notably so. A Viennese engineer 
who builds iron bridges on a large scale told 
me something of the difficulties an Austrian 
manufacturer has to face as a result of the 
visits of the tax-gatherer : 

" In calculating the cost of a piece of 
work," he said, " there are three important 
elements : the cost of the material, the cost 
of labor, and the allowance for taxation. 
Our tax laws are somewhat complicated, 
but I have found that an approximation, 
which is close, will amount to sixty per cent 
of the labor cost, which we must add for 
taxes." 

If manufacturers in this country were 
obliged to add to the cost of their products 
153 



Business and Education 

sixty per cent of what they pay for the labor 
that enters into them, as a contribution to 
federal taxation, our success in the world's 
competition would be slow. 

In Vienna I met an American who is at 
the head of one of the large boiler-works in 
this country. He had been interested in 
making comparisons of the cost of labor and 
of the methods of work in the Viennese fac- 
tories, and I found him amazed at the waste- 
ful methods and the high labor-cost that 
resulted from the Austrian manufacturers 
failing to use modern machinery. 

'' I was informed in one shop," he told 
me, " that a boiler of about 150 horse-power 
cost for labor alone $750. That boiler 
would have been built in an up-to-date shop 
in America for a labor-cost of $150. In 
the United States three workmen with mod- 
ern tools would accomplish as much in one 
day as would be done by four workmen in 
a Vienna shop working one week. The cost 
of the labor in the United States would be 
about $5, the men receiving for this class 
of rough work a little more than $1.50 a 
day. Of the four men in the Vienna shop, 
two would receive eighty cents a day, one 
sixty cents, and one forty cents, but even at 
those low wages the total labor cost there 
would be $15.60 against about $5 with us. 
I found an almost total absence of labor- 
154 



" Commercial Iwvasion " of Eui'ope 

saving machinery in some of the largest 
shops in Vienna — plates were being handled 
by hand; there were no riveting machines, 
no travelling cranes, or modern hoists." 

I asked a large manufacturer in Vienna 
why he did not introduce modern labor- 
saving machinery. He had been in Amer- 
ican shops and was fairly well posted on 
what was possible in the way of reducing 
the amount of labor entering into his prod- 
uct. His line of reasoning was interesting: 

'^ You will not find the latest labor-saving 
machinery here," he said, " because labor is 
so cheap that it does not pay to have the 
best machinery as it does with you. If we 
invest money in labor-saving machinery, the 
interest on the cost of that investment goes 
on every day in the year, and every succeed- 
ing year, whether times are good or bad 
and orders many or few. With our cheap 
labor it is different. When we have a rush 
of work we can employ more men ; in slack 
seasons we can discharge them. The trouble 
with labor-saving machinery is that you can- 
not discharge it when you have no work for 
it to do." 

Labor waste is not confined to industrial 
life by any means. Austria furnishes end- 
less illustration of a situation which is found 
in about all the European countries, but 
which is in its highest development in Italy, 
155 



Business and Education 

Austria, and Russia. In those countries the 
greatest ingenuity has been exercised in 
devising positions where the service per- 
formed is useless. Everywhere flunkeys 
stand ready to perform unnecessary services 
for one. You are not given an opportunity 
even to open the door — a retainer ahvays 
stands ready to do it for you, and then hold 
out his hand. If you call at a bank or 
public office, the concierge opens the door 
with great obsequiousness and hands you 
over to a guide, who shows you to the door 
of the room sought, where a flunkey takes 
your hat and coat, another your card, and 
still another ushers you in. On leaving, it 
is advisable to remember all these hard- 
working citizens with a pittance if you in- 
tend to make another visit and desire easy 
access. All this is typical of the way labor 
is wasted in the greater part of the Conti- 
nent of Europe. The thing seems to be done 
on principle, and to be generally approved 
on the ground that that system is best which 
keeps the most people employed. Any man 
who can create two jobs where there was 
only one job before, appears to be regarded 
as a public benefactor. The street-sprink- 
ling carts in Vienna make a good illustra- 
tion. A hose about six feet long is attached 
to the rear of the cart, and a rope about ten 
feet long is tied to the end of the hose. One 
•S6 



" Commercial In'vasion " of Europe 

man drives the cart while another walks 
behind holding- the rope and swinging the 
hose from side to side. If an American 
should try to introduce sprinkling-carts that 
could be operated by the driver, he would 
certainly be unpopular. " Why rob a poor 
man of his job? There is not enough work 
now to go round, and labor is cheap. It 's a 
small matter. These people are not able to 
do anything else; they have no trade, and if 
you introduce a device which renders their 
help unnecessary you simply force them to 
starve and become a burden upon the State." 
That is the kind of Chinese economics which 
I heard from educated men in various cities 
on the Continent. It did not seem to occur 
to them that work makes work; that the 
amount of work which the world wants done 
and is ready to pay for is capable of indef- 
inite increase, or that habits of slothful and 
unnecessary work must breed a people inca- 
pable of energy and enterprise. It takes two 
men to handle a plough in Europe, not be- 
cause one man really cannot do it alone, but 
because public sentiment approves the em- 
ployment of an extra man wherever the 
slightest excuse can be found for him. 

It needs only the period covered by the 
memory of a man still young to make the 
comparison which will show that the indus- 
trial life of Germany is in its beginnings. 
157 



Business and Education 

The picture of Germany twenty-five years 
ago, contrasted with the industrial Germany 
of to-day, shows a genius for work, a deter- 
mination for development, and a rapidity of 
progress which can be matched nowhere in 
the world, unless it is in the United States. 
The Germany of thirty-five years ago bore 
almost as little relation to the Germany of 
to-day as did some portions of the United 
States to our present condition. 

A great plain covering the entire north 
and east of the country where small crops 
were grown at high cost and with great 
labor; a table-land in the south almost as 
barren ; a few seaports, in only two of which 
was there entrance for vessels of the deepest 
draught; a large system of shallow rivers; 
fertile valleys in the south and west, but 
covering not over one-tenth of the area of 
the country; large deposits of lov/-grade 
iron ore; a coal area limited in extent with 
deep-lying seams from which came a product 
of poor quality; small deposits of copper, 
lead, and zinc; a large forest in the south; 
a small commerce; a manufacturing in- 
dustry hardly worthy of the name; a dis- 
ordered currency, a disorganized banking 
system, a deranged financial system, a con- 
fused foreign policy; a people divided into 
twenty-three states with only the tie of a 
common customs union, the coercion of the 
158 



" Commercial Invasion " of Europe 

Prussian hegemony, and a common language 
and literature — such were the materials of 
thirty-five years ago, out of which modern 
Germany was to be constructed. 

A population numbering 56,000,000, 
firmly united into a great national state; a 
system of internal communication the second 
largest in the world; a foreign commerce 
inferior only to that of England and the 
United States, which has reached out to the 
uttermost parts of the world in its conquest 
of markets, and has won its place in the 
face of long-standing commercial connec- 
tions; a system of industry which has util- 
ized to the full every resource the nation pos- 
sessed, which has brought the waste places 
under cultivation, and by careful methods of 
scientific agriculture has developed the yield 
of the soil more than threefold, creating de 
novo the beet-sugar industry ; a system which 
has quadrupled the production of coal and 
tripled the production of iron; which has 
developed the greatest chemical trade, the 
second largest electrical industries, the third 
textile, iron, and steel industries, and the 
second shipping system of the whole world; 
which has tripled the city population, re- 
duced a large and threatening emigration to 
insignificant proportions, raised wages, in- 
creased the value of land, and tripled the 
revenues of the State ; a strong, self-reliant, 

159 



Business and Education 

progressive, prosperous nation — such is 
modern Germany, the resuh of thirty years 
of nation-building. 

XeA'er before in the industrial history of 
the world, unless we except the victory of 
the same race in the Low Countries over the 
waves and tides of the German Ocean, has 
such success been achieved against such 
heavy odds. England has succeeded, but 
England was never cursed by invasion and 
civil war. England's soil is fertile. Her 
coasts are indented with fine harbors. Her 
security made her the home of the great in- 
ventions, and those inventions gave her the 
commerce of the world for more than three- 
quarters of the nineteenth century. The 
United States has succeeded, but the United 
States was blessed Avith the richest heritage 
of natural wealth that ever fell to the lot 
of any people. Planted in the midst of a 
continent, with a soil of extraordinary rich- 
ness ; Avith the coal seams lying open on the 
river-banks, and iron only needed to be quar- 
ried from the surface : Avith river systems 
penetrating every part of the country, and 
a chain of lakes to supplement the rivers ; 
Avith great harbors to receive and send out 
foreign trade, and Avith the hungry multi- 
tudes of Europe in sore need of our surplus 
— Avith all these natural advantages, and 
Avith only one serious catastrophe to our na- 
i6o 



" Commercial Invasion " of Europe 

tional development for eighty years, it is 
no wonder we have succeeded. 

Germany had none of these advantages. 
Germany must needs dredge her seaports, 
deepen her rivers, supply her deficiencies in 
raw material by importation, import the ma- 
chinery for her factories, and the technical 
skill to direct the machinery; build a rail- 
road system to carry her manufactured 
goods long distances to the sea-coast; and 
when she has done all this must fight her 
way into markets which England and France 
had long since occupied. To do all this 
while guarding against invasion on both 
frontiers, and bearing a heavy burden of 
taxation and military service, to succeed 
with no other aids than those of the national 
genius for hard work and the national am- 
bition for a great and commanding place 
among nations, and to win such success in 
the face of such difiiculties is an achievement 
before which both England and America 
should uncover in admiration and surprise. 
If the measure of success which a nation 
achieves over adverse circumstances is the 
test of greatness, then Germany is the great- 
est nation in the world. 

I reached Germany fresh from a study of 

most of the other Continental countries. In 

none of them had I found anything to lessen 

the conviction with which every American 

II i6i 



Business and Education 

goes abroad, that his own country is supe- 
rior in every respect to all other nations. 
Most of those nations are in one respect or 
another unmodern and unprogressive. They 
are succeeding slowly, and in few of the 
countries are the whole people united in an 
effort to achieve success. Their industrial 
regeneration is only just beginning: the 
United States has little to learn from them. 

But in Germany we find not only a state 
with apparently a great future, but a state 
which has begun to realize that future in a 
thoroughly modern way. The system of 
education, elementary, secondary, and uni- 
versity, certainly rivals our own, and is prob- 
ably superior to it. It is a system which 
leaves less than three per cent of the popu- 
lation illiterate, and sifts out the brightest 
minds and trains them for the service of the 
State. The State in turn is eager and anx- 
ious to avail itself of the services of men who 
have won intellectual distinction. There is 
a system of commercial education whose 
founders realized that successfully to deal 
with foreigners requires a speaking and 
writing knowledge of their language. There 
is a national and municipal administration 
which in their effectiveness and absolute in- 
tegrity must bring shame to the resident of 
almost any American city when he compares 
them with conditions surrounding him at 
162 



" Commercial Invasion " of Europe 

home. The Government has encouraged 
commerce and foreign trade with great in- 
tehigence. It has estabhshed the gold stan- 
dard and so organized the Reichsbank, that 
the mechanism of exchange has the founda- 
tion of secure confidence. It has aided in the 
estabhshment of German banks abroad, and 
placed German traders in the position of 
distinct advantage in pushing their commer- 
cial conquests. A trained consular service 
has been developed, composed of men who 
speak the language of the country to which 
they are sent, and who use the language to 
find out whatever may be of service to the 
German exporter. 

The Government has pursued a consistent 
policy in its trade relations and commercial 
treaties, which has all along been wisely 
adapted to the needs of the national econ- 
omy. While the industries were getting a 
foothold, they were protected by high duties. 
When their development had reached the 
stage of independence, and when their chief 
need was new markets, the Government made 
concessions to neighboring States in the cus- 
toms tariff, and, by a series of treaties com- 
pleted in 1893, admitted raw materials at 
low duties in return for similar privileges 
conceded to German manufactured exports. 
The Government early saw that private rail- 
way management in Germany was unfa- 
163 



Business and Education 

vorable to the export trade, because it had not 
learned the lesson of scientific rate-making, 
which we in the United States have only in 
recent years mastered. Perceiving this fact, 
the German Government took most of the 
private lines, and added to them until, in 
1901, out of 30,777 miles of railway more 
than 27,000 belonged to the State. In full 
control of the railway system, the State ad- 
ministration has worked out, very success- 
fully, the basic principles of rate-making, to 
increase the rates with the value of the 
freight. It has granted low rates on iron 
and coal, to which concessions the iron and 
steel industry of Westphalia owes in large 
measure its prosperity. The German Gov- 
ernment also has not hesitated to use the 
bounty system to build up the national in- 
dustries. The beet-sugar industry owes its 
existence quite as much to the aid of the 
State as to the painstaking care of the owner 
and scientist, and in a single year the exports 
of sugar and glucose to Great Britain from 
Germany have amounted to more than $50,- 
000,000. The German merchant marine has 
been intelligently assisted by liberal subsi- 
dies. I found among business men a quite 
general agreement as to the great benefits 
which industry and commerce had derived 
from subsidies. 

I asked Mr. Louis J. Magee, who might 
164 



" Commercial Invasion " of Europe 

be called an American-German, since he was 
born and educated in this country, but has 
spent twelve years in Germany as the man- 
aging director of the Union Electrical Ge- 
sellschaft, what in his opinion were the rela- 
tive advantages of Germany and America. 
His reply is suggestive : *' Most Americans 
are mistaken when they imagine that Amer- 
ica is much ahead of Germany in manufac- 
turing. It is six of one and half a dozen of 
the other. In some lines the United States 
has the advantage and is sending in goods 
to Germany. This is true of typewriters, 
bicycles, and of some other specialties re- 
quiring interchangeable parts. It is hardly 
true that Germany cannot make these things 
as well as America, but rather that it is more 
convenient and cheaper for Germany to buy 
them of America than make them. Our 
company, for instance, might make much of 
the machinery that we use, but it has rela- 
tions with the parent company in America, 
and so buys the things from America. It 
should be noted also that Germany excels in 
some specialties; for example, the Mauser 
rifle. It is the best in the world, and Ger- 
many is exporting it to all countries. In the 
same way your laboratories import certain 
chemicals and certain instruments from 
Germany, not because America cannot make 
them, but because they are cheaply made in 

i6s 



Business and Education 

Germany and that is the best place to get 
them. Americans make a great mistake in 
supposing that Germany is not up to date. 
Every German manufacturer knows exactly 
what is being done in his line in the United 
States, and knows what kind of machinery 
is being used. If he does not use it himself 
he has a reason that is satisfactory to him. 
The Germans are more conservative than 
the Americans. 

'' This fact can be illustrated, perhaps, by 
the automobile cab system. A superficial 
observer, knowing that these cabs were in 
use in American cities, would draw the con- 
clusion that Germany was not so progressive 
as America. But if he happened to know 
that the companies in Boston and Chicago 
had been financially unsuccessful, his con- 
clusion might not be so unfavorable to the 
German. The German has considered the 
advantages of the electric cab very carefully, 
and has not introduced them in the German 
cities simply because he has decided that they 
would not pay." 

Somewhat along this line Mr. Magee 
spoke of the Germans' ability in the field of 
science, and commended their habit of stim- 
ulating and encouraging independent inves- 
tigation. He regarded the Germans in this 
respect as superior to the Americans. 
" Americans are brilliant," he said, " and 
i66 



" Commercial Invasion " of Europe 

many splendid ideas — which the Germans 
call epoch-making — such as the cotton-gin, 
have come spontaneously. In the main, 
however, this is not the case. The great dis- 
coveries of the world have come, as a rule, 
as the result of patient effort and study. In 
this the Germans are adepts. In Germany 
every encouragement is given to a man to 
devote time and thought to new ways of 
doing things." Mr. Magee spoke of the 
Nernst lamp in this connection. This dis- 
covery of a German professor will make it 
possible, it is believed, to secure illumina- 
tion from electricity with only half of the 
current used that is now necessary. It will 
throw into the hands of many thousands of 
people the possibility of using this form of 
illumination. " It is quite possible," Mr. 
Magee said, " that improvements on this 
lamp may come from America. It will still 
be the Nernst lamp, however. What I want 
to see is a Nernst in America." During the 
last few years the reports of scientific dis- 
coveries contained in the American scien- 
tific journals have contained hardly an 
American name to act as a landmark. The 
names of the chief men in science to-day are, 
with almost no exceptions, men of foreign 
birth or descent. 

" The difference," said Mr. Magee, " lies 
in the fact that the Germans are patient, 
167 



Business and Education 

studious, thorough people, and they go to 
the bottom of things. The Americans, on 
the other hand, are more or less superficial. 
The}'^ are brilliant, but they have n't time to 
look at a subject from all sides and probe 
into it deeply as the Germans do. In science, 
particularly, there is n't the inducement that 
is offered to investigators here in this coun- 
try. In other fields the same conditions hold 
true. In political economy, for instance, you 
find the same thing. A man learns a little 
from his Walker and his Adam Smith in 
college, but he does not, as the Germans do, 
have pointed out to him the exact places 
where the requirements are not fulfilled, 
where the shoe pinches, and then set to work 
to gather all the data bearing on that par- 
ticular part of the problem, in order that he 
may find a solution of the difficulty." 

One is at once impressed with the fact 
that the Germans have been quicker than 
other nations to take advantage of improved 
machinery and methods. An inspection of 
our exports to Germany in the last half 
dozen years shows an extremely satisfactory 
increase in our sales of manufactured goods, 
but an analysis of the character of those 
manufactures brings out the fact that a large 
part has been in labor-saving machines, 
whose economics have at once been turned 
against us. There are some shops in Ger- 
i68 



" Commercial Invasion " of Europe 

many that are quite as admirably fitted with 
modern machinery as would be correspond- 
ing shops with us; and with such superior 
equipment, and with labor costing little if 
any more than half what our labor is paid, 
the German manufacture will make us look 
to our laurels. 

It is true that present economic conditions 
in Germany are far from satisfactory. Ger- 
many has gone ahead under too great a 
pressure. The pendulum has swung too far 
and is swinging back. There has for some 
months been a marked depression in many 
manufacturing lines, and conditions have 
prevailed that have caused apprehension and 
loss. The German banks do not follow the 
conservative English and American custom 
regarding the promotion of industrial enter- 
prises, and some of them have become in- 
volved in the fate of corporations which they 
have promoted and whose securities they 
have sold to their clients. I believe the un- 
satisfactory situation in Germany, however, 
is only a reaction from too rapid progress; 
the fundamental conditions are sound, and 
in the world's markets we are pretty sure 
to find Germany one of our most able com- 
petitors. 

While the conditions surrounding invest- 
ments in Germany are in many respects much 
better than in Italy or Austria-Hungary, the 
169 



Business and Education 

superior conditions are conpensated by lower 
interest returns. The Germans are wide- 
awake financiers, as well as manufacturers, 
and the opportunity for American capital- 
ists to teach them lessons is not as good as 
in most of the other European countries. 
In some respects we could learn a good deal 
that would be of advantage to our own in- 
vestment circles from the German practice. 
A code of corporation laws has been en- 
acted that has many points of great excel- 
lence, but the Government has shown its 
paternalism to a great degree in its effort to 
control operations on the stock and produce 
exchanges, and business has been much ham- 
pered from that cause. 

Kaiser Wilhelm has said — and industrial 
Germany agrees with him — that the future 
of the German nation lies on the sea. Ger- 
many is a poor country. Her coal mines are, 
in some places, 3,000 feet deep. Her iron 
ores must be supplemented from the richer 
deposits of Spain and Sweden. As popula- 
tion increases, Germany must import an in- 
creasing proportion of her food-supply. Her 
raw silk and cotton must be imported, and 
in fact she is independent in no single raw 
material. Her people must levy upon the 
whole world for their sustenance and to 
maintain their industries. To such a nation 
foreign commerce is as the breath of life. 
170 



" Commercial In'vasion " of Europe 

If four continents should sink into the sea, 
the United States would still live. But cut 
off Germany from her foreign trade, and 
she must perish. 

To sum up the situation, so far as the na- 
tions of the Triple Alliance are concerned, 
we see that Italy and the Dual Monarchy 
are not likely to become formidable competi- 
tors of ours in the world's markets ; that 
Germany is endowed with a spirit and am- 
bition which will probably make her our 
keenest rival, although we have clear ad- 
vantages in cheap raw materials. If we turn 
our attention toward investments in these 
countries, attractive opportunities will be 
found in Italy, but hampered by an uncer- 
tain currency standard and excessive tax- 
ation. Opportunity for the introduction of 
improved methods is even greater in Aus- 
tria, but political uncertainties and racial an- 
tagonism more than counteract that advan- 
tage, and the money standard is quite as 
uncertain as in Italy. There is much greater 
investment safety in Germany, and that, I 
believe is true, in spite of the headlong de- 
clines which securities have made on the 
German exchanges. 



71 



Business and Education 



III. England, France, and Russia 

It is in Great Britain that we find in its 
fullest development the effect of the Ameri- 
can commercial invasion of the world's mar- 
kets. It is true that American competition 
has been making notable inroads into the 
commerce of all the countries of Europe. 
But important as is the effect which has been 
produced upon commercial conditions in the 
Continental countries, that result is almost 
insignificant when compared with the con- 
sequence of this competition in Great Bri- 
tain. From the beginning of our history 
England has formed our most important 
market, and for two generations at least we 
have been the largest customers for English 
products. In the last half dozen years a 
change has taken place in the trade balance 
between the two nations which is, perhaps, 
the most notable single commercial event to 
be recorded in the last decade. We have 
been steadily reducing our purchases from 
the mother-country; we have been making 
astounding increases in our sales to her. 
Comparing, for instance, the change which 
has taken place in the trade movement be- 
tween the two nations in the last half dozen 
years we see that our annual purchases from 
the United Kingdom have dropped $16,000,- 
172 



" Commercial In'vasion " of Europe 

ooo, standing last year at $143,000,000. In 
the same period our sales to Great Britain 
nearly doubled, going up from $387,000,000 
in 1895 to $631,000,000 last year. This 
change in the annual trade balance, showing 
for us a more favorable total by $260,000,- 
000 than we had six years ago, is a change 
of such import as can only mean revolution- 
ary transformation in the industrial life of 
the two nations. These figures are so sig- 
nificant that they need to be dwelt on some- 
what, to fix in the mind their importance. 
Six years ago we sold to Great Britain 
$228,000,000 more than we bought. Last 
year we sold to her $488,000,000 more than 
our purchases. In every business day last 
year we sent to her $1,500,000 more than we 
bought. For every dollar's worth of goods 
we bought we sold her four dollars and 
forty-one cents' worth of our products. 

The relative importance of the increase 
in our trade with Great Britain is shown 
when we compare it with the increase which 
we have made in our sales to all the rest of 
Europe. Noting that our favorable balance 
in the trade with Great Britain last year 
showed an increase of $488,000,000 over 
the record of 1895, we find that that figure 
compares with an increase in the same period 
of $219,000,000 in our trade with all Con- 
tinental Europe. 

173 



Business and Education 

Such figures as these make it easy to see 
why the industries of Great Britain have 
more keenly feh our competition than has the 
rest of Europe, but even these statistics by 
no means measure in its fuh significance the 
efi:*ect upon British commerce of the " Amer- 
ican invasion." 

The nineteenth century may well be said 
to have been the century of Great Britain's 
commercial supremacy. During that hun- 
dred years the industries of the country stood 
pre-eminent in almost every line of manufac- 
turing. British manufacturers commanded 
completely their domestic field, but they did 
much more than that. They were in easy 
control of the greater part of the Avorld's 
commerce in manufactured products. Xot 
only have their Avorkshops held a command- 
ing position, but pre-eminence has been made 
more secure by control, in large measure, 
of the commercial fleets of the world. 

When our own manufacturers began seri- 
ously to reach out a few years ago for for- 
eign trade, there were few of them with the 
hardihood to attempt to meet British com- 
petition in the home field. What Ave did do 
was successfully to compete at points so far 
distant from the British factories that our 
own producers were little handicapped in 
the Avay of freight charges. We success- 
fully entered the South African gold-fields 

174 



" Commercial Invasion " of Europe 

and supplied most of the machinery for oper- 
ating the deep mines of the Rand. We went 
into the harvest fields of almost every British 
colony and sold agricultural implements to 
cultivate and gather their grain. We began 
successfully to compete in bridge-building 
on the pioneer railroads of Africa, and then 
we supplied those railways with locomotives, 
as we did also the government lines of India 
and the Far East. Our success extended 
rapidly, and it soon became evident that the 
political ties of Great Britain's colonies were 
not in themselves sufficient to bind to her 
their trade. For a good many years English 
contractors had things their own way in 
railroad-building in the British colonies. 
One day we shocked them when their own 
best bid of 15 guineas a ton for construct- 
ing the Atbara Bridge was met by an Amer- 
ican bid of £10 13s. 6d., and their time of 
twenty-six weeks was cut by the American 
contractor to fourteen weeks. They w^ere 
soon still more surprised when the bids for 
the Gokteik viaduct in Burma were opened. 
This was a much more important work. 
The best English bid was £26 los. per ton, 
with three years' time to complete the job. 
Americans took the contract at £15 a ton and 
completed the work in twelve months. The 
Ugandy viaducts, still more important in 
size, were built by American contractors at 

^75 



Business and Education 

a cost twenty per cent below the English 
price, and they were completed in forty-six 
wxeks, against the English requirement of 
130 weeks. 

Such illustrations might be almost indef- 
initely extended, nor would they need to be 
confined to bridge-building. Their special 
importance is in the basis which they formed 
for a manufacturing competition which drew 
nearer and nearer to the home market of 
English manufacturers. Success upon suc- 
cess has attended our efforts to compete in- 
dustrially with England, until we are at last 
sending our manufactured goods into the 
centre of the Englishmen's domestic field. 
There are English districts whose names 
have become words in our language synony- 
mous w^ith certain great classes of manu- 
factured goods. We have come to compete 
successfully in those very fields in their 
great specialties. It is literally true that we 
have sold cottons in Manchester, pig-iron 
in Lancashire, and steel in Sheffield. 

Details of this invasion cover a broad 
field. The changed relations between the 
industries of the two countries are probably 
the most pronounced in the production of 
iron and steel, but in a hundred lines of 
manufactures statistics tell the same story of 
great growth in our exports and quiescence 
or decadence in the corresponding British 
176 



" Commercial Invasion " of Europe 

field. Much less than a score of years ago 
England produced twice' as much pig-iron 
as was produced in the United States. Now 
we have an output half as much again as 
England's, in spite of the fact that her own 
industry has steadily grown. For many 
years we drew upon England for great 
stocks of iron. Our early railroads were 
laid with English rails. Now we are ship- 
ping many thousand tons back across the 
Atlantic to her and to her colonies around 
the world. The record in iron has been far 
eclipsed by the development in steel pro- 
duction. We reached a point where we 
could put unwrought steel into the English 
markets in successful competition with the 
steel mills there, and with that as a basis to 
build on and with the aid of superior me- 
chanical genius we have built up a market 
of great proportions for almost every line 
of iron and steel manufactures. We sent to 
England in a single year lOO locomotives. 
We have sent numberless stationary engines 
of all types and sizes, and with them boilers, 
pipes, pumps and pumping machinery, car- 
wheels by the thousand, wire and wire nails, 
metal-working machinery of every type, and 
great shipments of electrical dynamos and 
appliances. 

One of the industries that has felt most 
severely the American competition is the tin- 
12 177 



Business and Education 

plate trade of South Wales. Ten years ago 
it was a gigantic industry. It had no 
thought of competition in the home field and 
had complete control of the American mar- 
ket. In 1890, 330,000 tons of tin-plates 
were exported from Wales to America. 
Soon after that we began turning out, al- 
most in an experimental way, a small prod- 
uct of tin-plate. That production has in- 
creased with such rapidity that our manu- 
facturers are practically in control of their 
home market and have actually landed at 
Cardiff large shipments of American tin- 
plate. 

England's coal-mines have been one of 
her most important sources of wealth. They 
have given to her manufacturers cheap mo- 
tive power which has been one of their most 
important advantages. They have propelled 
the commercial fleets of the world, and their 
product has formed England's most impor- 
tant export. Coal has been the main sup- 
port of the shipping industries which have 
given her so much of her commercial su- 
premacy, constituting, as it has, four-fifths 
of the weight of all the commodities ex- 
ported from the British Isles. England 
owns sixty per cent of the world's steam 
tonnage, and anything which threatens seri- 
ously to alter the established order in freight 
movements is of great commercial import. 
178 



" Commercial Invasion " of Europe 

The foreign-trade retu;-ns do not yet show 
us as a great factor in the world's coal trade. 
England is still the dominating producer. 
But while the extent to which our exports 
have attained is not material, the figures 
which show the beginning of our entrance 
into the world's coal markets are in some 
ways more significant than any others that 
our foreign trade presents. We are just in 
the beginning of what is certain to be an 
economic development of world-wide im- 
portance. English authorities themselves 
recognize this and admit that a new current 
of trade has been set in motion that will 
sweep away a lot of old landmarks. Our 
production of 36,000,000 tons in 1870, in- 
creased to 71,000,000 in 1880, to 170,000,- 
000 in 1890, and to 240,965,917 by the end 
of the century, passing with the closing 
years Great Britain's production and estab- 
lishing our coal-fields as the greatest source 
of supply in the world. The enormous 
development of our own consumption kept 
pace with the increase of the product, so 
that little attention has been turned toward 
the export trade. Plans are now in hand, 
however, which will make the development 
of that export business the dominating feat- 
ure of our foreign trade within the next few 
years, and which promise more powerfully 
to affect British industry than any other 
179 



Business and Education 

single development that has influenced the 
trade of the two countries. 

The position which we occupy as a source 
of coal production is of such great impor- 
tance in any discussion of international trade 
that it is worth while noting some of its 
significant features. In 1870 the combined 
coal production of Great Britain, Germany, 
France, and Belgium, our chief competitors 
in Europe, was 176,000,000 tons, about six 
times our own production of 29,000,000. 
By 1898 the European output had doubled, 
those countries producing 352,900,000 tons. 
But in that same time our output had in- 
creased 700 per cent and stood at 218,000,- 
000, or 60 per cent of the total output of 
Europe, as compared with six and two- 
thirds per cent in 1870. We liaAX five times 
the coal area of Europe, 50,000 square miles 
as compared with 11,000 square miles, and 
we have in addition 200,000 square miles of 
lignite and other workable fields in reserve. 
Our bituminous coal lies near the surface, 
and most of it can be worked by drift mines 
above the water-level. European mines are 
frequently 3000 and sometimes 4000 feet 
deep. Our seams of coal average twice the 
thickness of the coal measures of Europe. 
The result of these conditions is seen in the 
increasing cost of European coal and the 
decline in American mine prices. In 1885 
180 



" Commercial Invasion " of Europe 

the average price of European mine coal 
was $1.62 per ton, and in the United States 
$1.58. Our methods were less skilful and 
the superior advantages of the mines in the 
United States were not yet manifest. In 
1899, however, the mine price of European 
coal had risen to $1.96, and in the United 
States the price had fallen to $1.10, leaving 
a margin in our favor which operates, at 
every stage of production, to lower the man- 
ufacturing cost of American exports. 

Illustrations of our successful competition 
might be multiplied into a tiresome cata- 
logue. We have secured practical control 
of the match-making industry; our tobacco 
manufacturers have become the dominating 
influence in the English trade situation; 
half the newspapers of England are printed 
on American presses or upon presses built 
on American models in English shops that 
are branches of the home manufactories. 
Many of those newspapers are printed on 
American paper. One of the serious ob- 
stacles hampering English industries is illus- 
trated in the paper trade. The freight from 
the New England paper-mills to the London 
Docks is less than from the Cardiff mills to 
the metropolis, and one-half the freight 
charge on an American shipment is made up 
of terminal charges incurred in the last 
twelve miles of the 3000-mile journey. 
i8i 



Business and Education 

Probably half the electric cars in the United 
Kingdom are driven by American-made 
motors. When the English postal authori- 
ties entered the telephone field, no English 
firm could supply the number of instruments 
wanted, and the contract went to a Chicago 
company. England is the home of cheap 
woollens, but our manufacturers of ready- 
made clothing are developing an important 
trade there, compensating for the higher 
cost of their cloth and the larger wages of 
their workmen by their advantages in spe- 
cialized labor and superior methods and 
machines. Our car builders, who have so 
specialized the building of freight-cars that 
the rough timber goes in at one end of the 
workshop and, almost under the eye of the 
spectator, comes out at the other end a fin- 
ished car, found an easy market in compe- 
tition with old-fashioned methods and hand 
labor. It is only within a few months that 
there have been in any English shop ma- 
chines for boring square holes such as enable 
our car manufacturers rapidly to mortise 
timbers in car construction. The work that 
is done in an instant with a whirl of flying 
chips was laboriously bored and chiselled 
out by hand by the English workers. The 
same advantage in labor-saving wood-work- 
ing machines enables us to send finished 
wood-work, sash and doors, for buildings 
182 



" Commercial In'vasion " of Europe 

at prices which cannot be equalled in the 
English shops. 

Instead of enumerating the fields in which 
we have met with competitive success, it will 
be more profitable to analyze in some meas- 
ure the reasons for our strength and for 
Great Britain's industrial weaknesses. A 
few weeks ago I was at a dinner in London 
at which was gathered a group of men rep- 
resentative of British industrial and com- 
mercial life. The conversation was on 
American competition, and at the conclusion 
of the discussion the views of these men were 
summed up in a conclusion with which all 
agreed, and their verdict, I suppose, may be 
taken in the main as representing the best 
commercial judgment in Great Britain. All 
agreed that there is a serious crisis in British 
industry, and they grouped the main reasons 
for it under three heads. The first is the 
attitude of the English workman in his 
desire, made effective by the power of trades- 
unionism, to restrict the output of labor to 
the lowest possible unit per man ; the second 
is the conservativeness of employers and the 
hostility of workmen toward the introduc- 
tion of labor-saving machinery; and the 
third is " municipal trading," a phrase which 
we have not encountered much at home, but 
which means the activities of municipalities 
in industrial undertakings, such as the devel- 

183 



Business and Education 

opment of systems of transportation and 
communication, the production of light and 
heat, in a word the municipal control of the 
utilities. On this last point there would 
undoubted^ be found wide differences of 
opinion among high authorities, and it is 
not my purpose here to enter into a discus- 
sion of the questions involved in it. In 
regard to the first two, however, I believe 
there is pretty unanimous agreement in the 
minds of trained observers of the conditions 
of industrial affairs. 

The highest development of labor-unions 
has been in Great Britain. Much of the 
earlier growth of these organizations was 
along correct economic lines, resulted in dis- 
tinct benefit to organized labor, and was 
undoubtedly helpful to British industries 
generally. A few years ago there came into 
existence a new unionism, which meant a 
unionism of force, a unionism which carried 
its points by strikes, and made strikes effec- 
tive by forcible interference with non-union 
labor. That new unionism has lately been 
succeeded by a newer unionism, which has a 
false economic theory for its foundation, 
and is, I believe, more than any other single 
cause, the influence to w^hich can be attrib- 
uted the present unhappy state of British 
industry. 

British trades-unions embrace nearly 
184 



" Commercial Invasion " of Europe 

2,000,000 members. The greater part of 
this army of organized labor has adopted 
a false economic theory. They hold that 
there is a given amount of work to be done 
in Great Britain, and that, if the day's out- 
put of the individual worker is decreased, 
the result will be an increase in the aggre- 
gate number of days' labor. They might 
not all of them state the proposition in just 
that way, but the irresistible logic of their 
position carries them to exactly that point. 
It is a cardinal principle with the members 
of most of the labor-unions in England to- 
day that it is desirable for them to produce 
with each day's work as small an output per 
man as it is possible to compel employers 
to accept. They believe that if a man does 
only half a given amount of work in a day, 
two men will have to be employed where 
one was before, or the job will furnish em- 
ployment for the one for double the length 
of time. They have the further uneconomic 
principle of a minimum wage, which is to be 
paid to all men employed, without regard 
to the relative value of their labor. Here is 
how the situation is viewed by high English 
authority: With the principle of the mini- 
mum wage is conjoined the principle that 
there shall be no maximum wage ; that is to 
say, if any workman shall induce his em- 
ployer to offer him higher wages than his 

185 



Business and Education 

fellows, they at once demand that the same 
increased wages shall be paid to all of them 
alike. If the master seeks refuge in im- 
proved machinery, the principles of limita- 
tion of output and minimum wage are still 
enforced. The machine mvist not be allowed 
to do all it can, any more than the men ; nor 
may it have an attendant, however simple 
his duties, at any lower rate of wages than 
that fixed for the skilled artisan who did the 
work before the machine was introduced. 
The machine, in short, must not increase out- 
put or displace labor. It is broadly argued 
that men will work their best if it is made 
worth their while, and not otherwise, but 
the unions say it shall not be made w^orth 
their while. It is not worth the wdiile of a 
bad workman to do better, for his mini- 
mum wage is secure. It is not worth the 
while of the good workman to put forth his 
strength or skill, for he would incur odium 
among his class and could not get increased 
wages in return. 

It hardly seems credible that the great 
mass of organized labor in England should 
be so blind to plain economic truths as to 
believe that their country can maintain its 
commanding position in the world's com- 
petitive markets when labor uses its keenest 
ingenuity and best endeavors to devise 
ways to restrict individual production. In- 
i86 



" Commercial Irwasion " of Europe 

stances can be produced indefinitely to sup- 
port the assertion that such is their behef. 
Such instances will show quotations from 
the rules of the organizations, which are 
devised to restrict labor and discourage en- 
ergetic workmen. There are many examples 
of direct official discipline of members who 
have shown a tendency to turn out more 
work in a day than the minimum which 
employers can be forced to accept. I have 
heard of many cases where men of ambition 
and energy, who found it difficult to adapt 
themselves to the easy-going pace which the 
union prescribes, got very much the worst 
of it in the contest which always follows a 
period of active work. Men who start in to 
turn out a . full day's work are frequently 
directly disciplined by their unions ; but if 
it does not reach that point, they are at least 
at once put under a social boycott. They 
are called " sweaters " and '' masters' men," 
and much ingenuity goes into the devising 
of ways and means to make their lives mis- 
erable and their positions untenable. 

Some of the notable illustrations of the 
spirit of curtailment of production are found 
in the building trades. Bricklayers in Lon- 
don, for instance, do not average over 400 
bricks a day ; those employed by the London 
County Council on public work lay materi- 
ally less. When it is understood that an 
187 



Business and Education 

active man can readily lay looo bricks a 
day, and from that up to 1600 it will be 
seen what a disastrous grip this " go-easy '' 
policy has. We have made, with our ex- 
portations running into millions of dollars, 
great inroads on the English boot and shoe 
industry. Some of that success can be ac- 
counted for by superior machinery and better 
organization and division of labor, but it is 
not surprising to find in this, as in a good 
many other fields where we have made pro- 
nounced competitive progress, that there is 
a clear understanding in the trades-unions 
controlling the manufacture of boots and 
shoes that a day's work shall be limited to 
a certain quantity, and that, should a man 
do more, his life will be made intolerable. 
The delusion which the English workman 
has harbored, that there is a certain amount 
of work to be done in that industry, and 
that if every one tries to do as much as 
he can there will not be work enough 
to go around, has led him to the natural 
result of such a fallacy. Chicago factories, 
usually paying wages from two to three 
times as high as are ruling in the English 
factories, are sending enormous exports into 
the English field. Those exports two years 
ago were a little over $500,000 ; a year ago 
they passed the million, and last year they 
were well on toward $2,000,000. 



" Commercial Invasion " of Europe 

Both English builders and workmen are 
having a most valuable object-lesson in the 
construction of the great manufacturing 
plant of the British Westinghouse Company. 
This company is building a $5,000,000 plant 
at Manchester, in which electrical machines 
of American model are to be built by Ameri- 
can methods. One of the finest mechanical 
plants in the world is being installed, and 
the manner in which the building operations 
have been pushed forward have been the 
marvel of both English builders and work- 
men. The plant was started under English 
supervision, but the work dragged along in 
such hopeless fashion that the task of com- 
pleting it was, last April, put into the hands 
of American building contractors. They 
spent $3,000,000 in eight months, and man- 
aged, though under great difficulty, to show 
a rapidity of construction such as England 
had probably in all her history never before 
seen. These contractors met with the same 
spirit among the English bricklayers that 
is to be found everywhere. With all their 
energy they could not get them up above 
800 bricks a day, so they imported some 
American bricklayers and set them at work 
on the slowly rising walls. They laid nearly 
2000 bricks a day. The pride of the Eng- 
lish workmen was at stake, and they aban- 
doned their " go-easy " principles, took off 
189 



Business and Education 

their coats, and demonstrated that they were 
as good bricklayers as the imported Ameri- 
cans, but how they will reconcile the record 
that they made under the eyes of the St. 
Louis contractors with what they are willing 
to do under English superintendence is a 
little difficult to say. 

In the coal-mining industry this fallacious 
policy of trades-unionism takes the form of 
" stop days," when all the miners stop work 
without respect to the views of the mine- 
owners because they believe that by so doing 
they will restrict production, hold up prices, 
and so keep up their own wages, which are 
regulated by a sliding scale based on the 
price of coal. Their economics have not 
been broad enough to grasp the prospect of 
American competition, but their methods are 
hastening its success. 

Since the great machinists' strike of a few 
years ago conditions in that trade are some- 
what better than before that dispute, which 
ended so disastrously for organized labor. 
There are still many restrictions imposed 
upon manufacturers which prevent them 
from securing anything like the best re- 
sults from the machinery they introduce. 
Throughout the mechanical trade the same 
false notion that the less work a man does 
in a day the more he leaves to be done by 
himself or his fellows is particularly aimed 
190 



" Commercial Invasion " of Europe 

against labor-saving machinery, and every 
rule the unions can devise to restrict the out- 
put of machinery and increase the labor cost 
is considered by the unions their material 
gain. 

The second serious embarrassment in 
which British industries are involved is the 
difficulty surrounding the introduction of 
modern labor-saving machines and mechan- 
ical methods. In the way of that improve- 
ment is the double obstacle of the conserva- 
tiveness of employers and the opposition of 
the men. Every one who has studied the 
English industrial situation will agree unre- 
servedly that labor-saving machinery must 
be extensively introduced, that the manufac- 
turing plants must be put on mechanical 
equality with those of America and Ger- 
many, before the English manufacturers can 
hope again to produce at as low a unit of 
labor-cost as is done in the two competing 
countries. 

Conservatism is a corner-stone of the 
English character, and it seems particularly 
pronounced in some of the families which 
have hereditarily been in control of manu- 
facturing industries. A machine that did 
satisfactory service for a man's father and 
grandfather comes to be regarded with a 
certain veneration. With us there is no 
recommendation better than that a machine 
191 



Business and Education 

or method is new. To speak to a manufac- 
turer of a new machine or a ncAv process 
interests him at once. His mind is open to 
investigate any improvement that is sug- 
gested, and. what is still more important, he 
has the courage when the value of the im- 
provement is demonstrated, to throw upon 
the scrap-heap machiner}- that may have 
cost him much, and to replace it with ma- 
chiner}- which will accomplish more. 

The mind of the English manufacturer 
does not work along these lines. As a rule 
he has a deep-seated prejudice against a 
thing that is nevr : it is not easy to win him 
over to an examination of a new machine 
or method, and it is always difficult to 
induce him to consign to the scrap-heap 
machines which have for years done him 
good and profitable service. 

The characteristics of conservatism that 
made the English business man for years 
combat the introduction of the typewriter, 
the consen*atism which to-day will not per- 
mit a telephone within the sacred precincts 
of the Bank of England, has in its operation 
in the industrial field cost England dear. 

Only the smaller part of the difficulty is 
over when the manufacturer has grasped the 
necessity for introducing a machine. His 
workmen are more prejudiced than he 
against mechanical innovations. They may 
192 



" Commercial Invasion *' of Europe 

have seen many examples of machines 
which, though first taking away the neces- 
sity for hand labor, in the end create far 
more opportunity for labor than at first 
existed, but those examples have failed to 
impress them. It is only with the greatest 
difficulty that labor-saving machines, abso- 
lutely essential to the continuance of manu- 
facturing establishments in a position to 
meet international competition, can be put 
into operation in the English workshops. 
Men sometimes refuse altogether to operate 
machines. The unions enforce restrictions 
in regard to the number of automatic ma- 
chines that one workman will be permitted 
to attend. They go on strike because non- 
union labor is put at work, and they hamper 
and embarrass in a hundred ways the manu- 
facturer who wishes to provide modern 
equipment. 

All that looks unreasonable at first, but 
the antagonistic attitude of English work- 
ingmen toward labor-saving machinery can 
be better understood when some of the other 
restrictions of English labor organizations 
are comprehended. Each trades-union, be- 
lieving there is a definite amount of work to 
do, and hoping to confine all of it of a par- 
ticular character to its own members, has 
hedged about entrance into each trade with 
the greatest of difficulties. The result is 

^3 193 



Business and Education 

that there is in England the least possible 
mobility of labor. A man, having learned 
one trade, finds it almost impossible to draw 
out of that and enter another. There are 
minute restrictions regarding apprentices, 
and the rules provide fines and disciplines 
for any member who teaches an outsider or 
permits him to use tools or in any way aids 
him in learning the rudiments of a trade. 
When this is understood it will be seen how 
serious is the position of an English work- 
man, if his place be menaced by the intro- 
duction of labor-saving machinery which 
might force him to seek employment in some 
other trade. 

Conditions as they have been evolved 
under the rule of the walking delegate and 
of labor leaders with the shallowest notions 
of economics are the despair of Englishmen 
who hope to see their country win back a 
lost industrial position. Those conditions 
are most profitable subjects for study by us. 
We have the beginnings of just the sort 
of unionism which, in its full development, 
has brought distressing results on England. 
There cannot be found in Great Britain any 
more absurd regulations restricting the out- 
put of labor than were in force in the build- 
ing trades in Chicago for two years, ending 
in paralyzing the building industry there. 
We have already grown accustomed to the 
194 



*' Commercial Invasion " of Europe 

strike which has for its object, not an in- 
crease of wages or a reduction of hours, but 
the imposition of restrictive regulations 
which would result in a decreased product. 
So long as our industries can go forward 
receiving the generous co-operation of labor 
which is still the rule, we will have an advan- 
tage over the countries of Europe in spite of 
a wage-scale more than double theirs, but 
that advantage will be menaced if the false 
conceptions which now rule most of the 
English labor organizations are ever gener- 
ally adopted by our own workers. 

When we turn to the statistics of trade 
between the United States and France, we 
find a condition in sharp contrast to that 
shown by the English trade returns. France 
has hardly heard of the American invasion. 
Her sales last year stood at almost the same 
point that they did ten years ago. Our sales 
to France during the same period have 
shown some increase, but taking the record 
of last year and comparing it with ten years 
ago the increase is but $18,000,000, while 
we remember that our annual sales to Eng- 
land increased in the last half dozen years 
$244,000,000. France has done everything 
she can with a high protective tariff to make 
competition difficult to foreign manufac- 
turers. She has done even more than that, 
with legislation which has in some instances 

195 



Business and Education 

made foreign competition impossible with- 
out any regard to price. The franchises 
which have recently been granted to many 
electric railways have provided that all mate- 
rial for their construction and equipment 
must originate and be manufactured in 
France. 

The exports of France are in the main of 
a kind that is not affected by the underbid- 
ding of foreign makers. French deftness, 
that artistic touch which the workers of few 
other nations can equal, gives a permanence 
to her hold on those foreign markets in which 
she is interested which has been little affected 
by those industrial developments that have 
made such profound impression upon the 
trade relations among England, Germany, 
and the United States. In ponderous lines 
of manufacturing we have reached unques- 
tioned superiority over France, but the same 
sort of skill which, in the fingers of the 
Parisian w^orkingwomen produces articles 
of unapproachable attractiveness, develops 
in the hands of the mechanic into a deftness 
which rivals the ingenuity of our best work- 
men, and leaves us without the advantage 
in the French market that we have in most 
of the other markets of the world. 

Russia is another country which, in spite 
of its enormous extent, its important posi- 
tion in the world's politics, and the tradi- 



" Commercial Invasion " of Europe 

tionally friendly relations between its peoples 
and our own, has been little affected by the 
" American invasion." With territory cov- 
ering an eighth of the globe, and a popula- 
tion of 130,000,000, the trade between this 
greatest of political units and our own 
country is still comparatively insignificant, 
and has in the last decade shown no remark- 
able changes. Our exports have shown no 
significant increase. Russia is a country of 
high tariff, and the tendency is toward 
greater protective restrictions about her do- 
mestic industries. That policy has resulted 
in a number of American manufacturers 
building important plants within the empire, 
but it has effectually prevented any remark- 
able development in our grasp of the Russian 
markets. 

I asked M. cle Witte, the Russian Finance 
Minister, how in his opinion commercial 
relations between the United States and 
Russia could be improved. 

" Practically, there is nothing that can be 
done," he said. " Theoretically, there are 
unlimited possibilities. If you only had a 
government that could do things as our gov- 
ernment can, a combination of the two 
countries would bring Europe to our feet. 
We could absolutely control the markets of 
the world for meat, bread, and light. I 
understand, of course, that that is impossible 

197 



Business and Education 

— impossible from your side. We could do 
it, but you, with your government, which 
must always listen to the people and shape 
its course for political reasons, could not." 

It is possible that the unattainableness of 
political unity of action which the distin- 
guished Russian deprecated may in effect be 
in some measure worked out by the com- 
binations — the industrial trusts — which 
have such great influence in various fields 
and Avhich are able to project into the com- 
mercial battle such effective unified efforts. 
European economists and industrial leaders 
are undoubtedly more alarmed over the ad- 
vantages which they see we are attaining 
by the aid of these great organizations than 
over any other point in our position. 

I have attempted in these articles to out- 
line some of the weaknesses of our foreign 
competitors and some of the corresponding 
points of strength that have developed in 
our own industries. The list of our advan- 
tages is an imposing one, but we cannot 
expect that all of them will be maintained. 
Our competitors are by no means blind or 
without energy or ability. The superiority 
of our labor, our larger use of machinery, 
our low taxation and small military burden, 
the homogeneity of our people, and the 
great breadth of the domestic field of con- 
198 



" Commercial Invasion " of Europe 

sumption, our comparative freedom from 
militant trades-unionism, the omnipotence 
with us of the industrial ideal, our freedom 
from a caste which in other countries pre- 
vents the best brain and the most highly 
trained intellect from engaging in industrial 
enterprise — all these are advantages which, 
so long as they hold good, make a broad 
foundation upon which to rest an industrial 
development of commanding importance. 
But unless the United States has some more 
permanent and fundamental advantage, I 
should lack the absolute faith which I now 
have in our development to a lasting com- 
mercial supremacy. No small part of our 
great exports in the last few years has been 
made up of labor-saving machines, which 
have at once been turned against us as guns 
captured from an enemy. From all over 
Europe deputations of technical experts are 
journeying to the United States and taking 
abundant advantage of our good-nature and 
hospitality. They praise our machines and 
make drawings of them ; they satisfy our 
pride with appreciations of our methods and 
they make copious notes. The result is be- 
ginning to be seen in many of the workshops 
of Europe. 

There can be no American monopoly of 
ideas. Civilization gives no patent on tech- 
nical supremacy. America may lead the 
199 



Business and Education 

world now in her ingenious application of 
labor-saA'ing machinery, but there can be no 
assurance of the permanent continuance of 
that advantage. Nor can assurance be given 
that American industrial society will always 
remain as mobile and as energetic as it is at 
present. We have already seen trades- 
unions attempting to force employers to 
make work rather than to produce wealth. 
\Y^ have seen strikes that have had for their 
basis only a desire for an increased power 
of interference, and from that it is not a 
long step to a position where union labor 
may be found struggling to restrict indi- 
vidual production. Strikes of that charac- 
ter have so far been successfully combated, 
but whatever there is left of the spirit that 
animated them remains a menace to Ameri- 
can prosperity. 

In our national conception of the dignity 
of work we have an enormous advantage, 
but that also may be in danger. Thus far 
industrial rewards have been made pretty 
strictly on a merit basis. There have been 
few sons and nephews of rich families to be 
taken care of. The future generation can 
hardly be so free from nepotism in indus- 
trial promotion. With the increase of 
wealth Ave have already the beginning of a 
leisure class, and it is not certain that indus- 
trial and commercial life can continue to 
200 



** Commercial Invasion " of Europe 

command the full service of the best brain 
and energy that we have. Our military 
burdens may increase if we measure up to 
the full extent of our responsibilities as a 
world-power. Tariff walls may be built 
against us. 

On all these points of present superiority 
we can have but small assurance of a lasting 
industrial supremacy, but I feel that a more 
fundamental reason for belief in such su- 
premacy can be advanced, one which will 
warrant the conclusion that America must 
inevitably lead the world in the twentieth- 
century commercial struggle. 

Of all nations the United States has the 
most unbounded wealth of natural resources. 
We have hardly comprehended the inevi- 
table advantages which those resources are 
to give us. 

Man's labor the world over is steadily 
decreasing in importance. It is the age of 
machinery. The forces of nature are to do 
man's work. All the world over the cost of 
production has fallen. The relative impor- 
tance of labor in the cost of production is 
lessening ; the sway of machinery is increas- 
ing. The twentieth century will be the cen- 
tury of machinery. Before it is half com- 
pleted we may expect to see that sort of 
human labor that is the painful and labori- 
ous exercise of muscle almost supplanted by 

301 



Business and Education 

automatic machinery directed by trained in- 
telligence. Such development of machine 
production steadily increases the impor- 
tance of raw material in the productive 
process. As the proportion of labor cost 
decreases, the cost of the raw material forms 
a larger part of the value of the finished 
product. 

The hand-weaver took a pound of cotton 
and spent a week in its manipulation. The 
cloth had to reimburse not only the cost of 
the pound of cotton, but six days of toil. 
Machinery was introduced into the industry, 
a week became an hour, and a hundred yards 
took the place of one. The price of each 
yard then had to pay the merest fraction of 
the cost of the labor which watched the 
looms. The proportion which the cost of 
the raw material bore to the cost of the fin- 
ished product enormously increased. So, 
under these modern conditions of manufac- 
turing industry, where machinery enters 
more and more into the manipulation, and 
the cost of labor forms a constantly decreas- 
ing relation to the whole, raw material comes 
to play a more and more important part. 
When machinery has fully entered into pro- 
duction, the cost of the crude products makes 
up the major portion of the cost of the fin- 
ished article. We can in a measure reduce 
the cost of raw material by improved meth- 

202 



" Commercial Invasion " of Europe 

ods in production and in transportation. 
The steam hoist and electric drill in the 
mine, the steam harvester and the steam 
plough on the farm, the mogul engine and 
the fifty-ton car, fast steamships of huge 
tonnage, have all greatly reduced the price 
of raw material. But no matter how strong 
the appeal. Mother Nature yields a slow and 
grudging consent to the efforts of her 
children to relax her grip. Man's success 
in cheapening raw material must always 
fall short of achievements in the realm of 
manufacture. 

Since the cost of material is an increasing 
part of the price of the product, those pro- 
ducers who can draw upon practically inex- 
haustible and rich supplies near at hand, 
who are not obliged to work poor ores and 
poor lands, or to transport materials great 
distances — the producers and the nation 
with those blessings are at tremendous ad- 
vantage when compared with others whose 
supplies of material are less rich and less 
advantageously located. 

The age of machinery is also the age of 
motive power, which is but another way of 
saying that it is the age of coal. The nation 
which has the cheapest raw material and the 
cheapest coal has a permanent and predomi- 
nant advantage in the world's markets, and 
it is an advantage which every improvement 

203 



Bwsmess and Education 

in method of manufacture will only serve to 
emphasize. 

When so much is admitted, the conclu- 
sion immediately follows that America's 
industrial future is secured. The United 
States has the most abundant and the cheap- 
est raw materials and supplies of fuel in the 
world. Germans and Englishmen may dis- 
pute with us over relative advantages in 
methods, in machinery, in labor, in business 
organization, and in commercial practice. 
They may claim that they have much to 
teach us and that they can soon learn what 
we have to teach them. American labor may 
contract the disease of trades-unionism, and 
American public burdens and social-caste 
developments may lessen our advantage, 
but American soil and minerals are eternal, 
and the resources of no other great power 
are for one moment to be compared with 
them. 



204 



THE INDUSTRIAL FUTURE 

An address delivered before the American Bankers' 
Association, Washington, October ii, 1905. 

With almost unmixed satisfaction the mem- 
bers of the American Bankers' Association 
may contemplate the progress of financial 
events during the year which has elapsed 
since their last meeting. Little short of be- 
wildering is the array of statistics which 
could be presented to demonstrate the rapid 
growth, sound development, and satisfactory 
progress made in the commercial, financial, 
and industrial fields. It is safe to assert that 
never before was our population so fully 
employed. Never before was the general 
level of wages so high, never before has the 
aggregate volume of industry been as great 
as it is to-day, never was the future of indus- 
trial activity so fully assured by advance 
orders. Never was the measure of commer- 
cial activity so large, and never before did 
such bountiful harvests meet such eager 
markets. 

The total value of the agricultural crop of 

the United States will this year exceed by 

$500,000,000 the average value of that crop 

during the last ten years. The money value 

205 



Business and Education 

on the farms of this season's crop will reach 
the staggering total of $3,000,000,000. You 
of the West and South are close to the 
true meaning of these figures. To eastern 
bankers such statistics are merely figures. 
Their aggregate is so vast that it is difficult 
to comprehend their true import. You who 
are closer to the fields, the granaries and the 
cotton presses, you who with your own eyes 
see the direct results of this flood of wealth, 
are more competent to comprehend its 
significance. 

Under the influence of harvests less boun- 
tiful than this, following one another with 
providential regularity, in the last half dozen 
years, you have seen whole communities 
change in character. People whose only 
acquaintance with finance was their knowl- 
edge of mortgage payments made to absent 
creditors have been converted into common- 
wealths with surplus capital and investment 
capacity. 

The whole great Mississippi Valley gives 
promise that at some day, distant perhaps, 
it will be another New England for invest- 
ments. There is a developing bond market 
there which is a constant astonishment to 
eastern dealers. You have seen the farmer 
in these half dozen years discover the uses 
of a bank account, deposit his income, pay 
off his mortgage, accumulate a surplus and 
206 



The Industrial Future 

actually become an investor in corporate 
securities. You have seen that sort of thing- 
multiplied and repeated until the aggregate 
wealth of the western and southern States 
has become astounding, even to you who 
have taken an active part in its growth. 

Now on top of these succeeding years of 
good harvests, good prices, intelligent liqui- 
dation of debts and thrifty accumulation of 
surplus, comes the unprecedented figures of 
the value of this season's crop yield. Surely 
America is a country blessed. 

The feature of agricultural life in these 
recent years has been great income, dimin- 
ishing liabilities and the provision of ample 
working capital, with all the economies and 
advantages which ample working capital 
provides. These conditions have worked 
marvels in the way of prosperity for the 
agricultural communities. But prosperity 
is not confined to the farms. These same 
influences — large income, diminishing lia- 
bilities and the provision of ample working 
capital — have been factors in the industrial 
field as well ; we can find as great prosperity 
under shop roofs as in the fields. The 
days when industrial competition commonly 
reached a point of destructive severity are 
largely past. The days when narrowness of 
outlook and lack of co-ordination led to the 
wasteful duplication of plants and a vast 
207 



Business and Education 

unproductive expenditure of capital, have 
given way to more intelligent management. 
That destructive competition, that duplica- 
tion of unproductive expenditure, led with 
unerring economic force to the industrial 
combinations which marked the last years 
of the century recently closed. The forces 
which led to these combinations were so 
irresistible that some industries were swept 
together under hastily considered plans. 
Combinations were made that were properly 
open to criticism. Heterogeneous elements 
were united in ways that meant inevitable 
friction. Diverse interests were brought 
together that could not in a day be harmon- 
ized. For a time there was doubt as to 
whether or not true wisdom had been shown 
by the men who formed these great industrial 
combinations. 

Evidence has now accumulated, I believe, 
to warrant an answer to that question. We 
anticipated economies when these combina- 
tions Avere made, but we are only just begin- 
ning to understand something of the full 
advantage which may result from the na- 
tional organization of certain industries. It 
took a little time to get these organizations 
running smoothly. It was not easy to find 
men with the broad economic insight which 
the management of such great enterprises 
required. When a nation meets a crisis men 
208 



The Industrial Future 

seem to be raised up ready for the tasks. 
When this country faced war we produced 
great miHtary generals. To-day, when the 
crisis in the management of vast industrial 
combinations is upon us, we are producing 
great captains of industry. These managers 
are not all great administrators any more 
than the war officers were all great com- 
manders, but I believe the world has never 
seen the parallel of the business genius which 
is coming into the work of organizing some 
of these great industrial combinations. Econ- 
omies are being brought about that were 
not conceived of when these organizations 
were formed. The co-ordination of a whole 
field of industry, the organization and dis- 
tribution of plants so that the industry is 
working under the least possible disadvan- 
tage in respect to transportation charges, 
the combination into such aggregates that 
expenditures may be made to effect small 
savings, or in introducing mechanical aids 
which would be impossible in small plants, 
but which on a large scale effect remarkable 
economy — all these developments are an- 
swering the question as to the wisdom of 
these combinations. The results are begin- 
ning to appear in the income accounts and 
balance sheets. The improvement there fore- 
shadowed is, I believe, but an indication of 
what may yet come. 
14 209 



Business and Education 

With the aid of a weakh of raw material 
and a genius for mechanical manipulation^ 
we developed a few years ago a capacity for 
industrial competition which startled the 
world. England, whose supremacy had been 
of such long standing that she rested in 
serene assurance, was crowded out of some 
of the international competitive markets. 
She was crowded to second place by America 
and then to third place by Germany. Our 
exports of manufactures doubled and doubled 
again and we had to be reckoned with in 
every international market. 

Then came a halt. Europe awoke to the 
situation. She bought samples of our tools 
and duplicated them. She sent an army of 
investigators to study our methods. She 
arrested us in our commercial conquest. 
That halt is proving to have been only tem- 
porary. Again we are showing unexampled 
totals in our exports of manufactures. The 
present figures are substantially exceeding 
the totals which we made at the time Europe 
coined the phrase, '' a commercial invasion." 
The reason for this late improvement, this 
regaining of ground temporarily lost, this 
making of new records, lies in the perfection 
of industrial organization which has been 
made possible by the great combinations. I 
believe we are just started on a new " com- 
mercial invasion." We have the cheapest 

2IO 



The Industrial Future 

raw material, the most efficient labor, a pre- 
eminent ability in the adoption of mechanical 
aids; and all that is combined with what I 
believe to be transcendent genius for eco- 
nomic organization. The combination of 
these forces will, I conceive, be well-nigh 
irresistible. The logic of this combination 
spells for us an unexampled development of 
foreign trade. All we need is intelligently to 
foster the possibilities. I am not giving rein 
to imagination. The cold figures of Govern- 
ment statistics show the beginning of this 
new industrial conquest. Comparisons of 
manufacturers' cost sheets reveal the possi- 
bilities of future successes. Our own homo- 
geneous domestic market, as great as that 
of half of Europe, contrasts strikingly with 
the tariff -hampered field of European manu- 
facturers. Our foreign competitors meet at 
every turn the obstacles of customs restric- 
tions, of racial differences and national 
jealousies. This great homogeneous mar- 
ket of ours makes a solid foundation upon 
which our industries can stand while they 
reach out successfully into competitive fields. 
The conquest of foreign markets will not 
be an easy one, however. We are likely to 
meet with defeat and failure at some points 
caused by our failure to give proper atten- 
tion to the business — and there are many 
examples of that in the past — or caused by 

211 



Business and Education 

a combination of obstacles which we cannot 
overcome. Perhaps we may see an example 
of the latter situation in the Far East. It is 
by no means certain that Japan is to stand 
courteously at the open door of Oriental 
trade and permit us to enter. \\t have seen 
in China what a racial boycott can do in in- 
terfering with trade totals. Oriental trade 
is not something won. but something to be 
striven for and there will be dithculty. defeat. 
disappointment, and discouragement. Xor 
is the trade of Europe to be ours for the 
asking. The obstacles of tariff walls grow 
higher with every meeting of Continental 
Parliaments. The ability to compete with 
us increases as our methods are better com- 
prehended. Germany has gone so far ahead 
of us in the proper education of the indus- 
trial classes that we may lose at times from 
that cause alone. 

I do not mean that advantage is to come 
to us through disaster to others. Wt have 
perhaps more than our just measure of pros- 
perity, but there seems, at the moment, to 
be good measure throughout the world. The 
world has withstood the financial strain of 
a war which cost the combatant nations two 
billion dollars. It has withstood that strain 
so easily that one is led to inquire how it has 
been possible that such a disaster should 
have produced no more unfortimate results. 

212 



The Industrial Future 

I believe the answer to that should be looked 
for in a quarter to which our academic 
friends have been giving some attention, but 
which has not as yet come to excite very 
great interest among practical financiers. It 
is not alone to the raisers of grain that nature 
has been bountiful of late. The mines of 
the world have been yielding treasure as 
lavishly as have our fields. In every day 
of this year, 1905, work days and feast 
days, holidays and Sundays, there will 
be drawn from the ground a million 
dollars of new gold. And then when 
the total is finally cast up there will be a 
number of odd millions to spare above that 
average. The mines of the world will pro- 
duce this year $375,000,000 of gold. The 
final figures for the production of gold in 
1904 have recently been made and they 
footed $347,000,000. We may reasonably 
look forward in the near future to an annual 
average output of $400,000,000 of new gold 
for at least a considerable number of years. 
When we remember that in 1885 the pro- 
duction of gold was but $115,000,000, we 
begin to get a comprehensive view of the 
significance of this increase. When we re- 
member further that the entire monetary 
stock of gold in the world is about $5,700,- 
000,000 we can calculate that the output 
from the mines in the next fourteen years 
213 



Business and Education 

promises to equal a total as great as the 
present monetary stock of gold. These fig- 
ures are startling. They perhaps suggest 
the possibility of a disturbance of values. It 
does not follow, of course, that with the pro- 
duction of $400,000,000 of gold per annum 
the monetary stocks will be increased by that 
amount. The uses of gold in the domestic 
arts draw off at least $75,000,000 a year, 
but that will leave over $300,000,000 a year 
to add to the gold reserves. So eminent an 
economist as Le Roy Beaulieu has estimated 
that the monetary stocks of the world will 
be doubled in twenty-five years. In the light 
of recent statistics of the output of produc- 
tion I have no doubt that he would modify 
that estimate and incline to the view that 
the monetary stocks will be doubled in 
twenty years. 

What is this to mean to the business situ- 
ation? What is to be its influence upon 
prices? What effect w^ill it have upon 
money-rates ? These are no longer academic 
questions. They are practical considerations 
which need to be taken into account by busi- 
ness men. The great increase in gold pro- 
duction which has been in progress since the 
close of the Boer War has, in my opinion, 
been a factor in the rapid recovery from the 
depression of three years ago. At that time, 
through financial excesses and indiscretions, 
214 



The Industrial Future 

we were led into a dangerous position. 
In Europe, also, the chilling effect of the 
great destruction of capital occasioned by 
that war was everywhere manifest. This 
new gold production pouring itself into the 
bank reserves of the world has been an in- 
fluence in bringing about the quick recovery 
from depression and in withstanding the 
shock of the further destruction of capital 
which the Russo-Japanese War entailed. 

The classical economists, Ricardo, Adam 
Smith, and Mill, evolved the quantity theory 
of money. They held that the prices of 
things would vary with the quantity of 
money in existence. If the money stock 
were doubled, prices would be doubled ; if the 
money stock were halved, prices would be 
cut in two. That theory has been proved to 
be inadequate. There are many other inter- 
fering circumstances and modifying condi- 
tions. Nevertheless there is economic truth 
and force in it. It is within the intimate 
knowledge of all of us that if our bank re- 
serves are increased we are moved to in- 
crease our loans. A pressure to increase 
loans tends to reduce interest rates. Lower 
interest rates enhance the price of income 
paying securities. I think every one will 
accept, subject to important modifying con- 
ditions, the statement that an increase in the 
monetary supply has a tendency to advance 

215 



Business and Education 

prices. There may be other influences that 
will counteract in the final result. There can 
be no doubt, however, that with every mil- 
lion dollars of gold added to the bank re- 
serves of the world, there is a disposition to 
increase credit lines. That increase in credit 
lines in turn has its influence on the side of 
advancing prices. As a practical matter, 
however, I do not believe we are facing any 
economic revolution as a result of this influx 
of gold. We must remember that the 
growth of business may keep pace or even 
run ahead of the substantial growth in the 
gold reserve so that in spite of actual increase 
the relative percentage of gold reserves to 
credit demand would leave prices unchanged. 
The subject is a fascinating one, but at the 
outset it must be admitted that it is not one 
for accurate calculation and definite conclu- 
sion. There are a few considerations, how- 
ever, and some popular misapprehensions in 
regard to it concerning which it would be 
well to have clear thinking. For example, 
it is rather commonly said a great increase 
in the gold supply will bring us to a perma- 
nently lower interest basis. That is a mis- 
conception. It is true that the first effect of 
gold additions to a bank reserve will be to 
lower the interest rate. That effect, how- 
ever, is temporary. When the money supply 
has reached a permanent level, no matter 
216 



The Industrial Future 

how great the increase in it has been, the 
interest rate, other things remaining un- 
changed, will find its regular level. Interest 
is but a payment in kind. If the value of 
money depreciates, the value of interest pay- 
ment depreciates as well. We need look for 
no permanently lower interest basis as a 
result of an increase in the money stock, but 
while that increase is in progress, the reserves 
are being constantly augmented and the 
tendency would be toward lower rates. 

There is another consideration which we 
should have clearly in mind. Disregarding 
for the moment all other influences, we may 
lay down the principle that an increase in 
the supply of money will tend to advance the 
price of real property, but the price of an 
obligation repayable in money will not tend 
to advance. That is to say that real estate 
and all forms of property, including shares 
of corporate stock, which represent an own- 
ership in real property, would advance, but 
bonds, which represent only the right to de- 
mand a payment in money, would not ad- 
vance. All persons having a fixed income 
would find the purchasing power of that 
income reduced. The return from mort- 
gages and bonds would have a reduced pur- 
chasing power. Persons receiving fixed sal- 
aries and wage earners generally would be 
at a disadvantage, for their incomes would 
217 



Business and Education 

not tend to increase as rapidly as the pur- 
chasing power of their wages decreased. 
Under such a set of circumstances there 
would be constant pressure from wage 
earners to increase their incomes in order 
to keep pace w^ith the advanced cost of 
living. Is not that exactly what we have 
been seeing, and are we not likely to see more 
of that same pressure to advance wages as 
the cost of living advances ? 

These are tendencies which would become 
sharply manifest if there were not counter- 
acting influences opposing them. That there 
are sure to be such counteracting influences 
goes without saying. I recall a conversation 
which I once had with the great German 
financier, von Siemens, the creator of the 
Deutsche Bank. The balances of trade in 
our favor had been climbing up from $400,- 
000,000 to $500,000,000 and then had gone 
w^ell beyond $600,000,000, and it looked as 
if we might drain Europe of her whole mon- 
etary stock if that sort of thing were to go 
on. I asked Herr von Siemens what was to 
be the outcome for Europe. He replied with 
a well-known German phrase, ''A tree never 
quite grows to heaven." Events soon proved 
that this tree of favorable trade balances 
could not quite grow to heaven, although 
for the moment it did look as if it were 
likely to. And so with this increased pro- 
218 



The Industrial Future 

duction of gold which gives promise of 
doubhng the monetary stock of the world in 
the next score of years. We might expect, if 
the theories of the classical economists held 
good, that with a doubling of the gold stock 
would come a doubling of prices. We can, 
however, be very certain that the theory will 
not entirely hold good. There wih be coun- 
teracting influences. While there will un- 
doubtedly be a tendency to advance prices 
as a result of this influx of gold into the bank 
reserves of the world, I do not believe the 
gold production is likely to become a seri- 
ous menace. I do not believe that it will 
so disturb those business relations that are 
based upon the terms of money as to cause 
any vital derangement of affairs. 

What I do believe is that there is likely to 
follow just what followed in the two former 
periods of the world's history when there 
was an extraordinary production of gold 
added to the monetary stocks. One of these 
periods followed the discovery of America, 
when the treasures of Mexico and Peru were 
exploited. The other was in the years fol- 
lowing the discovery of gold in California 
and Australia. In each case a mighty im- 
pulse was given to the exploitation of virgin 
fields of development. It seems to me not 
improbable that the next few years will wit- 
ness the expansion of the field of commercial 
219 



Business and Education 

enterprise into new places. Countries that 
are commercially and industrially backward 
will yield to this new influence. It seems to 
me that one of the direct and important 
effects of this great production of gold will 
be to give an impulse to the development and 
industrial exploitation of South America, 
Africa, Asia, and eastern Europe. At our 
own hand is South America on one side and 
China and Japan on the other. We are 
rapidly awakening to the commercial pos- 
sibilities within these countries. If we are 
to have an influx of gold more than ample 
to sustain the credit operations for our do- 
mestic afl^airs, that fact will tend to lead our 
interests into these new fields of exploitation. 
Then, in turn, a wider use of credit which 
these new fields will develop and the in- 
creased reserves which that wider use of 
credit will make necessary, will probably ab- 
sorb the increasing gold stock in beneficent 
uses, preventing it from ever becoming a 
serious menace to business organization. 

The outlook is surely bright. What can 
hurt us? What dangers are ahead? With 
bountiful harvests, with lavish mineral pro- 
duction, with increasing financial strength, 
with wonderfully improved industrial organ- 
ization, with a sound banking position, and 
with an impulse already given to every form 
of commercial activity, what is there to fear 
220 



The Industrial Future 

in the future? Is it clear sailing? Can we 
make commitments without fear for the fu- 
ture? Is the whole outlook into a cloudless 
financial horizon? An optimist might be 
forgiven for thinking that it ought to be. 
We have a good many elements of a firm 
foundation under our feet but again we 
might quote the German phrase, '' A tree 
never quite grows to heaven." Sure as we 
are of many of the substantial foundation 
stones upon which to rear a structure of 
prosperity, we may be quite as sure that 
there are dangers lurking in the situation. 
Some may be avoided, others will not. Some 
it is possible to foresee, others we will fail 
to recognize until we see their evil effects. 
Among those which we know exist, there 
comes first to mind our illogical and un- 
scientific currency system. We know that 
this system may at any time breed us trouble. 
We know that there is not a European finan- 
cier of broad intelligence who, looking dis- 
passionately from without at this currency 
system of ours, does not feel that it has in it 
dynamic possibilities for trouble even if other 
conditions are favorable. Indeed it is when 
all other conditions are most favorable that 
the danger is the greatest. Now, in the very 
fullness of the prosperity that we have, there 
might be a pitfall for us in that quarter. A 
strain is on our currency system. With our 

221 



Business and Education 

usual good luck we may avoid disaster, but 
it is the sort of time, nevertheless, when we 
ought clearly to see that we have a system 
which might endanger our banking position 
and retard most seriously our commercial 
development. We know that we are threat- 
ened by great social disorders ; that the edict 
of a labor leader might change a cloudless 
outlook into an uncertain one. We know 
there is a disregard of law in labor unions 
and in corporation offices alike, which is 
threatening to our welfare. We can, at the 
moment, clearly see that however prosperous 
conditions may appear, this prosperity might 
receive a severe check should a speculative 
fever begin to rage. Should a stock market 
speculation start from the present high level 
of prices in the face of the extraordinary de- 
mand for capital and money which crops 
and business alike are making, the result 
might easily be temporary disaster. 

I have been emphasizing some of the 
bright aspects of the picture, but there are 
shadows. In a gathering like this. Jere- 
miad songs are not pleasant, but there are 
some that might be sung v/hich would not be 
out of harmony with true conditions. Never 
was there a better time to preach conserva- 
tism; never perhaps was it easier to be car- 
ried away by some of the obvious features of 
prosperity and to forget some of the dangers 

222 



The Industrial Future 

which in the end will be quite as potent in 
shaping the ultimate result. " A tree never 
quite grows to heaven." Although there 
may be many favorable features to the out- 
look, it is no time for prudence to be cast 
to the wind ; no time for speculative com- 
mitments which would yield disaster if 
temporary reverses came; no time for lax- 
ness in any of the forms of business pru- 
dence and conservatism. 



223 



OLD-AGE PENSIONS FOR 
WORKINGMEN 

An address delivered before the Commercial Club of 
Chicago, October 28, 1906. 

Coffee and statistics were never intended to 
be mixed. The subject of old-age pensions 
for workingmen does not lend itself to the 
sort of after-dinner talk which men like to 
hear. I am sufficiently impressed with the 
importance of a study of the problems which 
the question presents, to believe that there 
are few topics which might better engage 
the attention of such a group of men as com- 
pose the Commercial Club, but I admit that 
the subject is not one that blends well with 
the smoke of an after-dinner cigar. 

No men know better than you the changes 
which have been going on in industrial life 
in the last generation. There have been ten- 
dencies toward specialization and concen- 
tration. There has been a remarkable ap- 
plication of mechanical aids. We have been 
working toward production on a vast scale. 
This has created an industrial army, the 
rank and file of which tend more and more 
toward becoming automatic wheels in the 
224 



Old- Age Pensions for Worhmgmen 

great industrial organ-ization. The new in- 
dustrial order has made a new social order. 
There is to-day no such thing as industrial 
independence possible for a working man. 
He must work with others. He must become 
subject to regulations in common with his 
fellows. He must, in exchange for the com- 
forts of life which have come to him, give 
up in large measure his industrial independ- 
ence and work in harmony with these new 
industrial conditions. 

So long as the individual can actively fill 
his place in this new order of affairs his con- 
dition shows great improvement in many 
respects. The moment he gets out of har- 
mony with the whirl of the industrial ma- 
chine, however, the moment that sickness 
overtakes him and accident injures him or 
old age reduces his power to keep in step 
with the industrial march, his condition is 
likely to become incomparably more unfor- 
tunate than would have been the case under 
similar circumstances in earlier times. 

Such business men as you recognize 
clearly enough a changed order of affairs in 
industrial and commercial life. You know 
that you must shape your business methods 
so as to harmonize with the new order of 
things. You know that you must co-operate 
in many ways with your fellows ; must share 
with them their risks; must help to sustain 
IS 225 



t 



Busmess and Education 

them in their misfortunes. You know that 
you have lost in the new order of things a 
certain amount of independence. It ought 
not to be difficult then to see that your em- 
ployees are also in the midst of a changed 
condition and that principles which apply to 
the relations between employers and em- 
ployees, and to the relations between the 
State and the citizen have been undergoing 
change. I believe that the reason why you 
are interested in the subject of working- 
men's pensions is to be found in the funda- 
mental change which has been going on in 
industrial affairs. I believe your interest 
logically follows the evolution of economic 
laws, and if we are to seek for a secure 
foundation upon which to rest judgment in 
regard to this question of workingmen's pen- 
sions, we will find it in an analysis of eco- 
nomic conditions rather than in sentimental 
consideration or charitable ebullition. 

Nations older than we are came earlier to 
a consideration of this subject. The place 
where the greatest progress has been made 
in an experiment in workingmen's pensions 
is in Germany. It is safe to say that the 
German system of workingmen's insurance 
is the most important experiment in progress 
in the world in the way of a government- 
aided sociological institution. The impor- 
tance of it is hardly understood in America 
226 



Old- Age Pensions for Worhmgmen 

nor is its extent realized. It pervades every 
phase of the industrial field. Twenty mil- 
lions of Germany's fifty-two millions of pop- 
ulation are eligible to these benefits, and the 
cost of administration falls alike on these 
beneficiaries and up@n all other citizens of 
the empire. The total receipts will, from its 
organization up to the end of this year, have 
aggregated almost $2,000,000,000. The re- 
ceipts this year will approximate $150,000,- 
000. A satisfactory feature of the German 
state insurance system is that the benefits 
paid out correspond very closely with the 
premiums paid in. The expense of adminis- 
tration, considering the enormous number of 
individuals concerned, and the fact that 
weekly contributions are collected from em- 
ployees, is surprisingly small. It averages 
under 9 per cent. 

The German system of workingmen's in- 
surance is not to be regarded as merely an 
old-age pension scheme. As a matter of fact 
the old-age pension feature is the least im- 
portant part of it and the least satisfactory. 
There are three great divisions of working- 
men's insurance in Germany. These are 
insurance against sickness, against accident, 
and against want in old age. The fund for 
insurance against sickness is provided in the 
main by the employees. The employers con- 
tribute roughly one-third and the workmen 
227 



Business and Education 

two-thirds. The Government gives no sub- 
sidy for either the sick insurance or the 
accident insurance. Employers are charged 
with the entire burden of maintaining the 
accident insurance fund, while the fund for 
old age insurance is contributed to equally 
by employers and employees, and is aug- 
mented by a subsidy from the Government 
which is nearly equal to the total cost of ad- 
ministering the whole system. 

It is quite impossible to enter into a de- 
tailed explanation of the German system of 
workingmen's insurance. I know of no 
other problem of administration where the 
details are so complicated. Not only are 
there three distinct systems of insurance; 
but there are complications of Government 
participation in the funds and of a division 
of the authority of administration between 
Government officials and some twenty-five 
thousand local organizations. Whatever 
view one might hold in regard to the benefits 
of the system, there could be no difference of 
opinion in regard to this method of adminis- 
tration. It is certainly too complicated to 
transplant to any other country. Many of 
these features of administration would, in 
any American consideration of the subject, 
be regarded as errors to be avoided rather 
than as examples tO' be followed. It is 
charged that the complicated administration 
228 



Old- Age Pensions for Workingmen 

had birth in the fertile brain of Bismarck, 
whose statesmanship was equal to killing 
twO' birds with one stone. In the pension 
system itself he placated the workmen who 
had run after the false gods of Socialism, 
and in the methods of administration he pro- 
vided a police espionage more complete than 
any ever conceived in the secret service of 
Russia. Be that as it may, the system 
has long since outgrown whatever may have 
been in the Iron Chancellor's mind at its or- 
ganization, but has not freed itself from the 
incubus of the enormously detailed adminis- 
tration with divided authority and compli- 
cated incidence. 

The principles underlying the theory of 
German workingmen's insurance might be 
briefly summarized in this way. The Ger- 
man nation was, in a few years, transformed 
from an agricultural country into an indus- 
trial state. An evolution at the same time 
was in progress in the field of industry which 
resulted in the highest specialization of work 
and the greatest development of the factory 
system. These all combined to make a prac- 
tically new social order of things, and made 
necessary an enunciation of new principles 
in regard to the duty of the community to- 
ward the individual. These principles are 
novel in political life, but fundamental in 
character. The Germans argue that no mat- 
229 



Business and Education 

ter how free they may be poHtically they 
cannot possibly be economically independent 
because of the intricate and complicated 
modern system of industry. The individual 
in spite of himself becomes a part of the in- 
dustrial order and is so placed that it is 
difficult, if not impossible,, for him to ex- 
tricate himself from his misfortune should 
he be overtaken by accident or sickness, or 
should he reach a dependent old age. In the 
new industrial order the liability to accident 
is greatly increased, and that in itself de- 
mands new means for meeting such a con- 
dition. 

In Germany, as indeed throug-hout Eu- 
rope, the question of the liability of employ- 
ers in the case of accidents to Avorkmen is 
one which for a number of years has received 
much attention from the law-makers. It is 
certain that with the introduction of high 
power and complicated machinery, there has 
been a great increase in the number of ac- 
cidents which are beyond the control of the 
workmen themselves. A strict interpreta- 
tion of the common law has for the most part 
absolved employers from the greater part of 
their obligations under such circumstances. 
The development of the workingmen's in- 
surance idea in Europe has been in large 
measure the logical result of efforts to reform 
the law relating to the liability of employers 
230 



Old- Age Pensions for Workingmen 

for accidents to their employees. Under the 
old law the employer was responsible only 
for those accidents resulting directly from 
his fault or the fault of his agents. The 
application of that law meant that the em- 
ployer bore the consequence only when the 
accident was due to his fault, and then only 
after the injured employee succeeded in 
legally establishing the proof of that fault. 
Europe has seen more plainly than we 
have in this country the injustice of such a 
condition. 

When such legal principles were evolved 
establishments were small, the employer was 
in intimate relation with the employee and it 
was comparatively easy tO' determine the 
responsibility. With the growth of large- 
scale production and the introduction of com- 
plicated and dangerous machinery, the whole 
system became so complex that it was ex- 
tremely difficult to trace responsibility. The 
result was that as a rule the full weight of 
suffering from an accident fell upon the in- 
jured employee. Here in America we have 
gone even further. We have perfected or- 
ganizations for insuring not the employee 
against accident but the employer against 
liability. These organizations are not to in- 
demnify the injured, but rather to indemnify 
the employer for the costs of fighting in the 
courts the claims of the injured. I am not 



Business and Education 

saying that employers have been without 
reason for wishing such indemnification. I 
know there are lawyers who might better be 
in jail than in court. I know there are juries 
which have determined verdicts on whether 
or not the defendant was a corporation 
rather than upon any facts that were pre- 
sented in regard to the case under consid- 
eration, but in spite of all this I do not be- 
lieve that even these evils Avarrant the way 
in which we throw the burden of accidents 
upon the injured. Elsewhere the world has 
grown beyond the old system of common- 
law liability. I do not believe that the or- 
ganization of shrewdly managed and power- 
ful corporations whose business it is to con- 
test in the courts the claims of injured 
people is in harmony either with the 
present-day condition of industry or with 
the present-day conception of humanity. 

I was saying that one of the most im- 
portant features of the German insurance 
scheme is the provision of an indemnity to 
persons injured in industrial occupations. 
The work has been in the direction of justice 
and of humanitarianism, but like most acts 
that are in conformity with justice, the ad- 
vantages have been greater than were at first 
apparent. 

Accident insurance as developed in Ger- 
many has been something more than merely 
232 



Old- Age Pensions for Workingmen 

the providing of an indemnity. It has been, 
in fact, an insurance against accidents. This 
definite placing of the responsibihty for acci- 
dents has led to much study by employers 
and employees of regulations providing for 
safeguards. Such study has accomplished 
remarkable results in the reduction of the 
number of accidents, and has become a 
great economic factor in removing the dan- 
ger from industrial callings. Under the 
influence of this study the frequency of acci- 
dents has been reduced one-half. Viewed 
from an economic standpoint alone the sav- 
ing which has resulted in the national econ- 
omy has been a vast sum. We are strikingly 
careless of life in America. The statistics of 
industrial injuries and fatalities are a dis- 
grace. In the rush of our industrial expan- 
sion we have neglected to provide many of 
the obviously necessary safeguards. From 
whatever aspect we may regard the subject, 
we will, on any broad view of it, find that the 
adoption of some of the European regula- 
tions and safeguards will be of great national 
advantage. 

The second division of the German in- 
surance system and the one which to my 
mind has by all odds most fully demon- 
strated its value, is the sick insurance fund. 
The advantage to the workmen of a sick 
insurance fund is clear enough. I will pass 

233 



Business and Education 

over without any comment the strikingly ad- 
vantageous features of this sick insurance 
system, for there are some others which 
seem to me of the highest economic impor- 
tance, and which are well worth emphasizing. 
I believe that this sick insurance system in 
Germany is having a profound effect on the 
whole physical welfare of the nation. I 
believe that the general level of vitality, and 
hence of working capacity, is being distinctly 
raised as a result of it. It must be remem- 
bered that the activities in the sick insurance 
field are not confined to the mere payment of 
the indemnity during a period of illness. 
The sick insurance not only makes it possible 
for a workman who is ill to take at once the 
necessary time for recovery, but it provides 
him with the best medical attention after he 
is ill, and while in health it gives hygienic 
supervision and instruction which is of the 
greatest value in preventing sickness. Un- 
der the operation of this system there is 
being spent in the most intelligent manner, 
something like $50,000,000 a year in the 
treatment and care of the sick. 

The testimony in regard to the value of 
the work done in the sick insurance system 
is almost universally favorable. It would 
be hard to calculate its economic importance, 
but I believe it is so great that it has become 
one of the leading factors in helping that 
234 



Old-Age Pensions for Worhlngmen 

country to the industrial pre-eminence which 
it is gaining. 

There is undoubtedly here and there 
ground for criticism. Lazy patients occa- 
sionally sham illness. There are workmen 
who would rather lie in bed with a small in- 
come than work for a larger one. But the 
principal effect of this sick insurance is, I 
believe, of economic value in the industrial 
development of the German Empire out of 
all proportion to the burden which is laid 
upon employers. 

The first two divisions of the German in- 
surance scheme providing for indemnities 
against accident and sickness will, I believe, 
commend themselves to every investigator 
of the subject. 

There is now left to consider the third 
division, the German old-age pension system, 
which is, as I have said, the least important 
and the most criticised feature of the German 
workingmen's insurance institution. The 
contributions which it calls for are very 
small, and the final pension provision is gen- 
erally regarded by the workmen as entirely 
inadequate. Although the employers con- 
tribute an amount equal to that contributed 
by the workmen, and the Government finally 
adds a considerable subsidy, there still is less 
general satisfaction among the workmen 
with this division of the insurance scheme 

235 



Business arid Education 

than with the others. The reason for that 
lies in a measure in the perversities of human 
nature. The contributions, small as they are, 
are collected every week, and are a constant 
reminder to youth of a sacrifice being made 
for problematical benefits a long way in the 
future. The benefits of the accident and sick 
insurance are more directly at hand. The 
workmen themselves are most intimately re- 
lated to the administration of the first two 
funds. 

There is a pretty general demand for an 
increase of the old-age pension. When it is 
remembered that the contributions from the 
men range from six to fifteen cents a week, 
and that these payments return a pension 
after seventy years of age of $27.50 to $60, 
it is easily recognized that there is ground for 
complaint as to the smallness of the amount. 
There is a general demand among the work- 
men to have a reduction in the age limit. 
Sixty-five years is considered a desirable 
time for the pension to begin rather than 
seventy years. 

One incidental feature of the administra- 
tion of the German system which is proving 
of very great value is to be found in the way 
in which the sick and accident funds are ad- 
ministered by committees made up of em- 
ployers and workingmen. Employers and 
workingmen come together on common 
236 



Old-Age Pensions for Worhingmen 

ground. They are working toward common 
ends. With the responsibihty of administra- 
tion on their shoulders radical socialists be- 
come conservative. With the broader point 
of view which close association with em- 
ployees brings, the employers are benefited. 
The fact that in the twenty-five thousand ad- 
ministrative organizations, workmen and em- 
ployers have been brought together to give 
harmonious consideration to the means for 
accomplishing a common end, is proving of 
immense importance in maintaining pleasant 
relations between capital and labor. 

As the German system of workingmen's 
insurance is by all odds the most important 
experiment of this sort in the world, I have 
been to some pains to ascertain at first hand 
just what German manufacturers and men 
of affairs think about it. I have felt that it 
would be interesting to you representative 
men of affairs, to know what is thought in 
Germany of this institution by men of our 
own type. With that in view I addressed a 
series of questions to a considerable number 
of the most prominent manufacturers and 
other representative men in Germany. I 
regret that I have not received the same 
courtesy in the way of replies that I believe 
would have been accorded by you had an 
inquiry come in the other direction across 
the Atlantic, but I have, nevertheless, re- 

237 



Business and Education 

ceived a number of replies from some of the 
most important people in Germany. In the 
main the views held are distinctly favorable 
to the institution, although in the details of 
its administration there is found ground for 
criticism. The idea seems to be general that 
the system works for patriotic loyalty to 
the Government on the part of the working 
people. The earlier idea of the State in the 
Avorkmen's mind Avas largely based on the 
policeman, the sheriff, and the tax gatherer. 
The State always took something. Xow it 
is said if we watch a post-office money-order 
department on the first of the month, Ave see 
the people draAving their insurance money, 
and for the first time the Avorkman a^cavs the 
State as a giver. ]\Iore than a million marks 
a day are paid out to them in this Avay. and 
the result in the Avay of developing patriotic 
regard for the Government is excellent. 

The characteristics of the German labor- 
ing system have been described as Ioav Avages, 
pensions, and contentment. The first is cer- 
tainly correct. In many fields of labor in 
Germany the pay is less than one-half the 
amount corresponding Avorkmen Avould re- 
ceive for similar Avork in this country, and, 
not infrequently, it is not over one-third. 
On the Avhole the German Avorkingmen, so 
far as I have been able to observe, appear to 
be more contented than American Avorking- 
238 



Old- Age Pensions for Workingmen 

men. Whether this contentment is due to the 
pension system or not is, of course, an open 
question. The contentment of the German 
working classes might be described as phys- 
ical rather than mental. The German is 
nothing if not critical. The whole German 
nation is given to analysis and criticism of its 
own institutions, and if one wanted to collect 
evidence of discontent among the German 
working classes, and went to the printed page 
to do it, there would be no end to the mass 
of testimony. 

None of my correspondents claimed that 
the effect has been to make the workman 
contented. The Empire is new. Germany's 
industrial prominence is new. One cannot 
separate the effect of this insurance and say 
that certain good results are due to it alone. 
That the v/orkman is not content must be 
admitted, nor is the man who makes a mil- 
lion contented. The workman has had this 
new set of rights and privileges given to him, 
and his eyes are opened to the possibilities 
of more rights and greater privileges. A 
perspective of new things is opened to him. 
His discontent, however, is due not to faults 
of the pension system, my correspondents 
tell me, but rather to a desire for an exten- 
sion of its benefits. 

The general effect of the system is thought 
to have a good influence in preventing a 

239 



Business and Education 

tendency toAvard Socialism. Alost of the 
workmen who are members of the adminis- 
trative committees are Social Democrats. 
My correspondents tell me that it is simply 
wonderful to see how the most radical politi- 
cal shouters quiet down when they find them- 
selves on a committee discussing grave mat- 
ters and charged with the responsibility of 
important decisions. 

I asked my German friends their opinion 
as to whether or not it would be advanta- 
geous for America to adopt a workingmen's 
pension scheme. Their replies to that ques- 
tion were illuminating. This is what the 
manager of one of the greatest industries 
said : " I think the general opinion in Ger- 
many is that in America the creation of 
large funds under Government control would 
cause great temptation for their misappro- 
priation. Their collection and distribution 
would be too dependent upon politics. This 
opinion seems largely justified in view of the 
instances of maladministration that so many 
of your Government Departments have re- 
cently furnished. The German opinion is 
that the American citizen is as yet too indi- 
vidual in his honesty and ef^ciency. Collec- 
tively, as exhibited in the government of 
your municipalities and of the State, 3^ou 
seem to us weak in economical and ineffec- 
tive in business management and financial 
240 



Old- Age Pensions for Worhmgmen 

integrity." That is not a pleasant criticism 
to receive, but there is more justice in it than 
we all might wish. 

Another correspondent, most eminent in 
both industrial and public life in Germany, 
says : '' The German nation believes that it 
can conscientiously recommend the introduc- 
tion of the system of workingmen's insurance 
into other countries, but so far as the United 
States is concerned, such a system does not 
seem as great a necessity as in other coun- 
tries. Wages are higher in America and 
the workmen better capable of providing for 
the future." He then makes an interesting 
suggestion. He says : '' There is no doubt 
that the introduction of compulsory insur- 
ance would produce a social line of demarka- 
tion between those who are obliged to sub- 
mit to the law and those who are exempt, 
and we doubt if the people of America would 
look upon such a social classification with 
favor. It cannot be denied that with the 
German system there is a certain amount of 
tutelage which the American workman in 
consequence of his independence would bit- 
terly resent. Should the system ever be in- 
troduced, I do not believe it would be wise 
to entrust it to the various States. It will 
be more beneficial if brought under the con- 
trol of the Federal Government." 

In every Continental country the political 

i6 241 



Business and Education 

questions which occupy the foremost posi- 
tion in parhamentary consideration are 
measures designed to improve the condition 
of the laboring population. We are apt to 
think of ourselves as a republic more swayed 
by the democratic voice of the people than 
are other nations. It strikes an American 
as curious to find that, in monarchical Eu- 
rope, governments everywhere are paying 
the closest heed to the public will. This, of 
course, is true in small measure in Russia, 
but in France, Germany, Belgium, Italy, and 
Holland particularly, and in Austria-Hun- 
gary and Spain to a less degree, the foremost 
legislative movements are concerned with 
questions of improving the condition of the 
laboring people. 

The way in which parliaments bow to 
popular will was strikingly illustrated in the 
French Assembly some three years ago, 
when by a vote of 537 to 3 the law concern- 
ing aid for old people was passed. The 
French Government has for years taken a 
benevolent attitude toward this subject, and 
in particular has made it easy for persons in 
humble circumstances to secure annuities 
from the Government either by a single small 
payment during the early years of life, or by 
a series of payments. 

The principle of giving aid to old people 
was adopted in a moderate way ten years 
242 



Old- Age Pensions for Worhingmen 

ago, but it was not made compulsory upon 
the various Departments. The present law 
broadly proclaims the obligation of the State 
to aid people whose years have passed the 
line of usefulness. In all the debates in the 
Assembly, that principle — the obligation of 
the State to give aid — was not opposed, and 
the admission of the principle is, of course, 
the most important fact about the whole 
affair. The present law considers the obliga- 
tion as one to be largely borne by the com- 
mune or township, and the major part of the 
payments are made from commune funds, 
although the funds of the general Govern- 
ment are used to supplement the local grants. 
It is anticipated that somewhere from 300,- 
000 to 500,000 people will receive regular 
monthly payments when this law is in full 
operation. 

Even the Russian Government has made 
provision for insurance by the State. There 
the business is entrusted to the governmental 
savings banks. The Government proposes 
to make the taking out of insurance oblig- 
atory so far as employees on the Government 
railways are concerned, and it arranges for 
the payment of the premiums by deductions 
from the monthly salaries. 

With the exception of the United States, 
all the great powers of the civilized world 
pension their civil servants. 
243 



Business and Education 

The question of civil pensions in the 
United States is, I presume, not one that 
interests you particularly, but I believe it is 
one in which you ought to be interested. 
The full working out of the merit system in 
civil service can never be accomplished, I 
believe, until we recognize the principle of a 
civil pension for superannuated Government 
employees. There is no other important 
nation which has not recognized that prin- 
ciple. I doubt if there are any men who 
have ever been charged with the responsibil- 
ity of an appointive office in the Government 
service, who haAX not come to recognize that 
need, and who have not been won over to the 
belief that it would be economy in Govern- 
ment administration if a proper system of 
civil pensions were devised. 

Look now from the foreign field to what 
has actually been accomplished in the way 
of old-age pensions in this country. There 
will be found much that is interesting. A 
careful canvass has been made of railroads 
and large business corporations in America 
to ascertain the number of such corporations 
which have been led to adopt some sort of 
old-age pensions. In an inquiry reaching 
nearly two thousand corporations replies 
show that seventy have adopted some plan 
for retiring and providing for employees 
during old age. Without a single exception 
244 



1 



Old- Age Pensions for Workingmen 

these corporations which have adopted such 
a plan expressed the opinion, after having 
had an opportunity to note its effects, that 
it is a wise business practice. Among the 
corporations having a pension system are 
some of the most important in the United 
States. Some four hundred others repHed 
that they had the matter under serious 
consideration and that they were convinced 
that the principle was sound from a business 
viewpoint. 

More than thirty years ago, the Grand 
Trunk Railway of Canada adopted a pension 
system which has been growing in impor- 
tance, and has continually given good reason 
for commendation from both the ofihcials and 
the employees. Fifteen years ago the Balti- 
more & Ohio followed suit. In 1900 the 
Pennsylvania Railroad and the First Na- 
tional Bank of Chicago formulated pension 
systems, and the following year the Penn- 
sylvania lines west of Pittsburgh and the 
Illinois Central adopted pension plans. In 
1902 the Andrew Carnegie Relief Fund, with 
its $4,000,000 benefaction was organized, 
and half a dozen important railroads, includ- 
ing the Southern Pacific and Canadian Pa- 
cific, and the Chicago and Northwestern, 
became convinced that the method was wise. 

The most notable step which has been 
made in this country was accomplished this 
245 



Business and Education 

year by the great Carnegie benefaction of 
$10,000,000 for providing pensions for col- 
lege professors. This act of America's great 
philanthropist has received more approval 
than any other of his vast benefactions, and 
it promises a marked and beneficial effect on 
our whole system of higher education. 

As a rule th'ose American corporations 
which have adopted the old-age pensions 
system have treated the matter in the light 
of deferred wages, the corporations bearing 
the entire expense of the pension require- 
ments. The method of the Pennsylvania 
Railroad is typical of this form. 

In a word, the Pennsylvania Railroad 
retires upon a pension, all officers and em- 
ployees compulsorily at the age of seventy, 
and may retire them between the ages of 
sixty-five and seventy, provided they have 
been thirty years in the service. 

The amount of the pension varies with 
the years of service, and with the average 
monthly pay for ten years preceding retire- 
ment. The average monthly pay for ten 
years preceding retirement is the basis, and 
the pension is i per cent of that amount for 
each year of service. The Company reserves 
the right to alter this basis whenever the 
allowance made under it shall demand an 
annual expenditure in excess of $390,000. 

When the Pennsylvania officials were ex- 
246 



Old-Age Pensions for Workingmen 

amining the subject, they found that nearly 
every important railroad system in the world, 
outside of America, had provided in some 
form for the retirement of old employees. 
The basis of the plans adopted by all the 
foreign corporations and governments con- 
templated contributions on the part of the 
employees. That was not in accordance 
with the ideas of the Pennsylvania officials. 
In that case the Company wished to assume 
all the expense involved, and in that respect 
the practice of the Pennsylvania Company 
and of most other American corporations is 
at variance with the accepted practice else- 
where in the world. Another method, of 
which a typical example is that of the First 
National Bank of Chicago, provides for con- 
tributions to the pension fund by both em- 
ployer and employee. 

In respect to the age of retirement there 
is a fair amount of unanimity in all plans. 
The majority of the schemes fix the age 
at sixty-five. A number of them, the Penn- 
sylvania Railroad being an example, give 
some play to the judgment of employing 
ofiQcers so far as the retention of employees 
between the ages of sixty-five and seventy 
is concerned. The Carnegie Company re- 
tires men at the age of sixty, and the Grand 
Trunk Railway of Canada at the age of 
fifty-five. 

247 



Business and Education 

As a general rule, in the plans thus far 
adopted in this country, specified length of 
service is required as a condition precedent 
to obtaining a pension. The Canadian Pa- 
cific, Illinois Central, and Baltimore & Ohio 
Railroads have fixed that term of service at 
ten years. The Carnegie Company and the 
First National Bank of Chicago fixed it at 
fifteen. The Southern Pacific and its allied 
lines make it twenty years, while the Penn- 
sylvania Railroad and a number of Eastern 
roads made it necessary for an employee to 
have been thirty years in their service. On 
the other hand, the Philadelphia & Reading 
has adopted a very broad plan. On that 
railroad any faithful employee, irrespective 
either of age or of length of service, who 
receives injuries in the performance of duty, 
or becomes incapacitated through sickness, 
may be awarded such a pension as the 
president determines. 

Practically, without exception, those 
American railroads which have adopted the 
pension system provide the entire fund out 
of which pension allowances are paid. The 
Grand Trunk Railway requires a contribu- 
tion of 2j4 per cent of the monthly wages. 
The First National Bank of Chicago requires 
a contribution of 3 per cent. While the 
employee contributes to the fund, provision 
is always made for the return of his pay- 
248 



Old- Age Pensions for WorT^mgmen 

merits in case he severs his connection with 
the service. 

If I were to attempt to summarize the 

reasons why institutions in the United States 

are beginning to adopt old-age pension 

^schemes, I would say that they embrace such 

considerations as these : 

Ihe pension attaches the employee to the 
service and thus decreases the liability to 
strike. It makes more certain a continuance 
of efficient men in the lines of work with 
which they are perfectly familiar. Of quite 
as much importance is the fact that a pension 
system enables employers to dispense Avith 
the elderly and inefficient, and thus gives 
constant encouragement to good effort on 
the part of y(>iiii:rei- men hoping for promo- 
tion. When employees realize that unsatis- 
factory conduct may at any time lose them 
not only their present positions, — a loss 
which in such a labor market as ours might 
be easily made good, — but that it entails 
further the loss of a very valuable asset, the 
employee's right to a pension, the incentive 
to good conduct is greatly increased. It 
operates especially as an incentive to hold 
men between the ages of forty and fifty when 
they have acquired the experience and skill 
which makes them especially valuable, and 
prevents their being tempted away by slightly 
increased wages for a temporary period. 
249 



Business and Education 

Those business institutions which have 
adopted the old-age pension scheme have 
not done so from sentimental considerations, 
but rather from considerations of economy 
and efficiency of administration. They have 
found that when provision is made for those 
who are too old to render efficient service, 
every employee in the service who recognizes 
that at some time he may become eligible to 
such benefits Avill be under strong induce- 
ments for good behavior. In financial insti- 
tutions particularly, if men are removed 
from anxiety for the future,, they are much 
more apt to devote their best efforts exclu- 
sively to their careers and to be in less danger 
of diverting their energies into side channels 
of money-making — channels which may 
easily lead them on to dangerous ground. 

No one can doubt that there is weight in 
these reasons. On the other hand, they cer- 
tainly do not in themselves offer sufficient 
ground for us to jump to the conclusion that 
we are ready for a compulsory system of old- 
age pensions which should be under the 
Government's supervision. With such study 
as I have been able to give to the subject, I 
should, at the present time, summarize my 
conclusions as not going further than to say 
that it is eminently a subject for careful 
painstaking study. I do not believe the 
German system could be transplanted here 
250 



I 



Old- Age Pensions for Worh'mgmen 

in anything like its entirety. I am, however, 
perfectly confident that those features of the 
German system pertaining to sick and acci- 
dent insurance are of enormous value to the 
national economy, and are producing results 
out of all proportion to their cost. 

That there is to be development of the 
industrial pension idea is as inevitable as the 
working of the laws of economic progress, 
and whether that development should be 
directed by the Government, or whether it 
can best find expression through the indi- 
vidual action of corporations, I am not pre- 
pared to offer an opinion. The thing that 
I do thoroughly believe, however, and the 
one conclusion which I have formed, and the 
one which seems to me you ought not to find 
difficulty in agreeing with, is that the subject 
is worthy of thorough scientific study. I 
believe the Commercial Club would be ren- 
dering a service of great value to the country 
if it would either undertake on its own be- 
half, or,^ perhaps preferably, would use its 
great influence to get the President or Con- 
gress to undertake, a thorough investigation 
of the whole problem. There is a scarcity of 
literature in English .on the subject, and 
what has been printed is now mainly in the 
form of scattered articles and buried reports. 

A commission which would give the sub- 
ject a thorough investigation and would put 
251 



Business and Education 

the results of that investigation into such 
shape that we could grasp the significance 
of Avhat has been done would be of great 
value. I believe it is worth the while of such 
men as 3^ou to give impetus to such a move- 
ment, to throw your influence on the side of 
a complete inquiry into all the phases of this 
subject. If to do this accords with your 
judgment, I am confident that an inquiry so 
instituted will be followed by results that 
will be of very great economic importance to 
the nation. s^- 



252 



AMERICANS FOREIGN COMMERCE 

An address delivered before the Chamber of Commerce 
of Wilmington, North Carolina, September, 1902. 

We are all aware that we are in a unique 
period of commercial, financial, and indus- 
trial development. It is undoubtedly the 
most important, the most remarkable and 
the most interesting period of industrial and 
financial evolution in the history of the 
nation. We have witnessed, in the last half 
dozen years, a commercial expansion and a 
financial movement alike unparalleled in the 
achievements of our own country or in the 
growth of other lands. 

These half dozen years have been produc- 
tive of statistical totals bewildering in their 
magnitude, — of industrial expansion un- 
paralleled either in volume or in significance ; 
of widening financial influence; of broad- 
ening credit operations ; of banking develop- 
ment, — all marking growth so great that 
it is becoming difficult for us to view with 
a correct and rational perspective the phe- 
nomena marked by these new totals. 

Familiar as you all are with the salient 
features of this development, I wish for a 
moment to emphasize a few of the more 
253 



Business and Education 

noteworthy facts. I do not want to weary 
you with any statistical catalogue, but only 
to indicate in the most general way some of 
the features of this remarkable period. 

In the domestic field we have had both a 
series of extraordinary crop years and a 
period of extraordinary industrial activity. 
On the agricultural side, we have seen the 
annual value of farm products increase far 
over a billion dollars in the last half dozen 
years, and we have seen the value of the 
farms themselves advance more than four 
billion dollars in the same time. In the 
industrial field, we have had a period of the 
fullest employment of labor (except where 
labor has chosen to refrain from work), and 
of the highest general level of wages which 
has ever been known, either with us or with 
any other people. The definite evidence of 
this prosperity w-e have seen in a doubling 
of the individual deposits in national banks, 
the total going up from roundly a billion six 
hundred millions in 1896 to three billion two 
hundred millions this year. In the same 
time the deposits of savings banks have in- 
creased seven hundred millions, the deposits 
in State banks a thousand millions — con- 
siderably more than doubling the total of six 
years ago — and the deposits in trust com- 
panies also more than doubling, the increase 
there being six hundred million. In these 
254 



Americans Foreign Commerce 

half dozen years the credits represented by 
individual deposits in banks of all classes 
have increased roundly four billion dollars, 
an increase nearly equal to the total deposits 
of all kinds half a dozen years ago. 

Bank clearings — an excellent measure 
of general trade — increased in these half 
dozen years 150 per cent, and it is estimated 
that the total wealth of the country has had 
more than twenty billion dollars added to it 
in that period. 

We have increased our coal production one 
hundred million tons, and passed easily to 
the position of the greatest of coal-producing 
nations. We have almost trebled our pro- 
duction of steel, leaving our competitors far 
behind in any comparison of volume of busi- 
ness. We have added four hundred million 
dollars to the annual product of our mining 
industries. 

So the catalogue might be indefinitely 
extended, with ever-increasing totals and 
more and more confusing aggregates of 
almost incomprehensible numbers. In a 
word, whichever way we turn we find that 
the figures measuring the volume of busi- 
ness, the extent of industry, the growth of 
financial importance, have in these last half 
dozen years made an apparent gain equal to 
the entire total six years ago. It is hardly 
too much to say that in six years we have 

25s 



Busmess and Education 

doubled the figures measuring the apparent 
extent of our annual domestic business. 

Now, for a moment, to turn from the 
domestic side of the account to the foreign 
situation. Here we have recorded gains 
which have given deep concern to the whole 
commercial world. We passed the billion- 
dollar mark with our exports in 1896, and 
in five years more the total stood just under 
a billion and a half. At the same time our 
imports were declining, so that we were not 
only making wonderful inroads upon foreign 
markets, but we were more than holding our 
own in our own markets in competition with 
foreign manufacturers. Our foreign trade 
balances began to show incredible totals in 
our favor, running up well over six hundred 
millions a year, and causing the gravest 
apprehension in the minds of our commercial 
rivals in regard to the industrial readjust- 
ment which the world must look forward to 
if such totals were to be maintained. In a 
single year we imported one hundred and 
five millions of gold. The world sud- 
denly discovered that we were not alone 
its granary, but we were likely to become 
its workshop. We pushed into^ the foreign 
markets with the handiwork of our me- 
chanics and the products of our machines, 
month by month increasing our sales, until 
from a total of less than two hundred mil- 
256 



America's Foreign Commerce 

lions of exports of manufactures we had 
soon far exceeded four hundred milHons, 
making increases so rapid that Europe was 
brought face to face with the problem of 
reorganization of her industries to meet this 
new-born competition, and a readjustment 
of her finances to pay for her increased pur- 
chases, which she seemed unable to offset by 
increased sales. 

I had the privilege a year ago of meeting 
many of the foremost statesmen and finan- 
ciers of Europe, and of discussing with them 
the commercial cjuestions which had been 
raised by our rapid industrial development, 
and by our wholesale invasion of their 
markets. Everywhere I found the problem 
receiving most serious attention. Every- 
where it was regarded as the most vital of 
economic questions, and nowhere did I find 
anything but wonder over the development 
which we were showing and apprehension 
in regard to the effect of its continuance. 
Where it was to lead in its effect upon Euro- 
pean industries and European finances, if it 
were to continue, was the unsolvable prob- 
lem of finance ministers, bankers, and indus- 
trial captains. I had the privilege of a con- 
versation at that time with Germany's most 
distinguished financier and industrial up- 
builder, the late Georg von Siemens — the 
creator of the Deutsche Bank, the adviser 
17 257 



Business and Education 

of the Government, the originator of vast 
industrial enterprises. I asked him what 
was the future of the old world in respect 
to this new industrial development and this 
sudden show of financial strength in Amer- 
ica. I asked him what was to be the result, 
if we Avere to go on selling to Europe six 
hundred millions of goods a year more than 
we bought, increasing our exports, decreas- 
ing our imports, building up a theoretical 
trade balance of such totals as were new in 
international finance. 

Herr von Siemens was a wise and an 
experienced man. He had passed through 
crises and through periods of inflation, and 
he viewed the outlook with calmness. 

'' I am not concerned about what will hap- 
pen to Europe if you are to go on in this 
triumphal way," he told me, '' because you 
will not go on. There Avill be something 
Avhich will stop you. Something always 
does happen in such a situation as this, and 
something will happen now. I do not know 
what it is; my vision is not broad enoiigh 
or clear enough to foresee it, but you will 
make mistakes and a halt Avill be called." 

It is my purpose to-night to examine 
somcAvhat critically the present industrial 
and financial conditions, Avith a vicAV to see- 
ing if this shrcAvd German observer Avas 
right, with a vieAv to determining if some- 
258 



Americans Foreign Commerce 

thing has happened to call a halt in our 
progress toward a command of the world's 
markets, and then to offer you, if I can, 
some suggestions as to why it is that we 
have failed to keep up the pace, and as to 
what can be done to remove the obstacles 
that are retarding our progress. 

I am just back from another European 
trip, and have again met many of the most 
distinguished of European statesmen and 
financiers. The change that the year has 
made in their point of view is extremely 
interesting. They are no longer fascinated 
by our progress. Instead of that, I found 
in every capital I visited, and in the mind 
of almost every keen observer of interna- 
tional affairs with whom I conversed, a belief 
that we have for the present marked the 
high-water point of our overflow of exports 
into the European industrial field. And in- 
stead of credulous belief in the unlimited pos- 
sibilities of our development, which seemed 
to be the average state of mind a year ago, 
there is to-day a feeling of grave conserva- 
tism and anxious interest in our future. 

They note that the rapid increase of our 
exports came to a halt two years ago. They 
note that our imports in the last two years 
have been rapidly rising, the record for the 
fiscal year just closed being more than nine 
hundred million dollars, against only a little 

259 



Business and Education 

over six hundred millions in 1898. They 
note too, that in spite of that tremendous 
balance of trade which Government reports 
showed in our favor, a balance running-, as 
I have said, up to an average of almost six 
hundred millions a year, we do not seem to 
have any unusual command upon interna- 
tional credits, but we are as a matter of fact 
a considerable debtor in the world's ex- 
changes, and that now, in the midst of ex- 
traordinarily bountiful harvests, and at the 
season when a movement of gold in this 
direction might normally be expected — we 
are concerned lest a high rate for sterling 
shall lead to gold exports. 

If we are honest with ourselves, w^e must 
admit that the edge is off our invasion of 
foreign markets. Our totals are still colos- 
sal, but the rate of increase which they were 
making has been checked, and decreases have 
been recorded. Our exports of manufactures 
for the fiscal year just closed are thirty 
million dollars less than the point they 
reached two years ago. Our total exports 
of domestic merchandise fell off more than 
a hundred million dollars in the year. In- 
stead of decreasing imports we have made 
some large increases in our purchases of 
foreign goods, and the total for this fiscal 
year stands more than three hundred million 
dollars above 1899. 

260 



Americans Foreign Commerce 

If we chose to examine critically our do- 
mestic condition we might find there, too, 
developments not in every respect satisfac- 
tory. It must be with the keenest regret 
that we recognize unfavorable conditions 
that threaten a break in the unparalleled 
magnificence of this story of industrial 
growth. Nothing will better repay thought 
and study than inquiry into those causes, 
which seem to imperil a continuance of this 
wonderful period of prosperity. Nor can 
any investigation be of more vital impor- 
tance than a consideration of what safe- 
guards it is possible for us to provide against 
the recurrence of these cycles of depression 
which seem always to follow periods of 
prosperity. 

It is not my purpose, however, to dwell 
upon some of the evidences of inflation, upon 
a too free issue of securities larger than the 
value of properties warrant, and more rapid 
in creation than investors can absorb, nor 
upon labor conditions fraught with serious 
menace, which already mark their effect 
upon industrial totals. Instead of a broad 
survey of the whole situation, I wish to take 
up a single phase of it, a phase which has 
been well illustrated by a recent episode in 
financial affairs. 

In cataloguing the splendid list of indus- 
trial and commercial achievements, I have 
261 



Business and Education 

been telling a story that is old to your ears. 
The totals are so wonderful as to remain 
fresh with interest, but they present a view 
of the situation which has now for several 
years been pretty well fixed in the minds of 
all of us. Statistics are wearisome. In an 
after-dinner talk they are almost unpardon- 
able. But I am going to ask you to give 
attention to a few more figures, and I regret 
that they are figru'es that cannot be looked 
upon with the degree of satisfaction with 
which, in the last three or four years, we 
have been wont to regard all of our com- 
mercial statistics. 

The Comptroller of the Currency, a few 
days ago, completed his report showing the 
condition of all national banks last month. 
That report, it seems to me, is one of the 
most significant that has in a long time come 
from the Comptroller's office, and it will 
well bear some analysis and comparison. 
If we are merely looking for large totals, we 
may again find them here, figures in some 
respects surpassing all previous records. 
The total deposits, individual, bank, and 
Government, in all national banks, foot up 
four billion five hundred and twenty-seven 
million dollars. Now, if we turn back to a 
similar report for the beginning of 1899, 
we will find the total of the same items 
three billion two hundred and twenty-six 
262 



America's Foreign Commerce 

millions. Now, for a moment, bear these 
figures in mind. Roughly, four billion and 
a half deposits now, against three billion two 
hundred million in 1899 — and with that 
increase in the liabilities of national banks 
in mind, let us look at the figures represent- 
ing the reserve basis. The total of specie 
and legal tenders held by the national banks 
last month was five hundred and eight mil- 
lions. The total at the beginning of 1899 
was five hundred and nine millions. Here 
we have had an expansion of a billion three 
hundred millions in deposits, while the basis 
of gold and legal tendei"*s, upon which that 
inverted pyramid stands, is actually slightly 
smaller than it was at the beginning of the 
period. Now, in that same time the deposits 
of other banks — State banks, trust com- 
panies, savings banks, and private banks — 
have probably increased not far from three 
billion dollars, and there is little likelihood 
that their gold and legal tender reserve is 
materially larger than — if it is as large as 
— at the beginning of 1899. We have had 
then in less than four years an increase in 
the total bank deposits of the country of 
over four billion dollars, accompanied by no 
increase in the specie and legal tender hold- 
ings of those banks. 

What has brought about this remarkable 
development of bank credit? The answer 
263 



Business and Education 

must at once come to the mind of any ob- 
server of finance, that the principal reason 
for the expansion of deposits and the accom- 
panying expansion of loans is to be found 
in the great movement which has been the 
significant feature in financial affairs of the 
last half dozen years — the movement to 
aggregate industrial establishments into 
single great corporate units, and to convert 
the evidence of ownership into corporate 
securities which have entered actively into 
the stream of financial operations. Vast 
amounts of new securities have been created 
in these half dozen years, based in large 
measure upon properties which were before 
held as fixed investments by individuals, or 
if standing in the form of corporate prop- 
erty, the securities of those corporations 
were more closely held, and in but small 
measure entered into the financial operations 
of the day. This movement — tending to 
convert the evidence of ownership of a great 
amount of fixed property into a form which 
has been considered a bank collateral, and 
which has been made the basis of loans and 
of corresponding increases of deposits, is 
undoubtedly the most important single cause 
for this increase of miore than four billion 
dollars in bank deposits and bank loans of 
the country in the space of three or four 
years, 

264 



America's Foreign Commerce 

Another important contributing influence 
has been the vast expenditures of corpora- 
tions — railroad companies particularly — 
for the improvement, betterment, and exten- 
sion of their properties. New securities have 
been created, and the capital which was ob- 
tained by their sale has been converted into 
a fixed form of investment. When our rail- 
roads were first built economy in construc- 
tion was the prime consideration. Now it 
has come to be that economy in operation is 
demanded. At first it was economy in the 
use of capital ; now it is economy in the use 
of labor. And so we have seen, not only 
with the railroads, but in every department 
of industry, . a lavish investment of capital 
in order that the cost of production might be 
cheapened. 

Now let us suppose that all this great ex- 
penditure has been wisely made, and in the 
main I believe that it has, that every dollar 
which has been expended in the improvement 
and betterment of railroads, in the extension 
and better equipment of industries, will effect 
economies which will result in a saving 
equal to a fair interest return on the capital 
so invested. But, granting that the invest- 
ment, from that point of view, has been wise, 
a consideration which we have perhaps in 
some measure lost sight of is that this whole 
great movement of improvements and better- 
265 



Business and Education 

ments has been drawing from the fund of 
hquid capital and converting it into a fixed 
form, so that such capital cannot be fully 
returned into liquid shape, from the result 
of increased earnings, before the next ten 
or fifteen years. 

If a farmer were to ask a country bank to 
loan him ten thousand dollars to put up new 
buildings and generally improve his prop- 
erty, the banker, while admitting that the 
expenditure might be a profitable one in the 
added return which the farm would give, 
would say that the proposal was not a good 
banking proposition, that bank funds could 
not properly be tied up in an investment of 
that character, but must be loaned for ob- 
jects which, in the natural order of the com- 
mercial season's progress, would liquidate 
the debt in a much shorter time than would 
be possible were the capital to be converted 
into such a fixed form of investment. Rec- 
ognizing this principle, the National Bank- 
ing Act very wisely prohibits loaning upon 
real estate. Sound as the security is, it is 
not within the lines of the banking principle 
which embodies the practice of making only 
such loans as will in the natural order of 
business liquidate themselves within a few 
months. 

If a railway manager were to ask from 
his larger bankers a million-dollar loan to 
266 



Americans Foreign Commerce 

put into better bridges and heavier track, 
the same answer would be made. It would 
be unwise for a bank sO' to tie up active 
capital by converting it into a fixed form of 
investment. Profitable as the banker might 
be convinced the investment would be in the 
greater economies which it would bring to 
the operation of the railroad, he would see 
that it would be unwise financiering for him 
to loan his deposits for conversion into a 
fixed form of investment which could not be 
liquidated should his depositors begin to re- 
duce their deposit lines. Securities issued 
for just such purposes, however, form much 
of the basis of this increase of four billions 
of loans. The loans are excellent so long 
as A can sell his collateral to B should A be 
called upon to repay, but if A and B should 
both be called upon to pay, there is nothing 
in the nature of these loans which will per- 
mit them rapidly to work out toward liqui- 
dation in the natural order of things. It is, 
in effect, a loaning of bank credit for con- 
version into a fixed form of property. 

If, say, two-thirds of the total income 
from industrial investments were to be re- 
turned to the betterment of properties, and 
there should be issued in place of the capital 
so spent additional securities, the process 
would be wise and beneficial. If, on the 
other hand, there should be converted into 
267 



Business and Education 

the form of fixed property by expenditures 
for improvements and betterments, a total 
amount of capital considerably exceeding the 
total annual income from such investments, 
the result in the end could lead only to dis- 
aster, no matter how wisely these expendi- 
tures for betterments and improvements 
might be made — because in the process 
there would be absorbed a larger and larger 
amount of liquid capital into the form of 
fixed investment, banking reserves would be 
reduced, and when bank deposits were de- 
manded, though there might be the sound- 
est of security back of them, it would be in 
a fixed form unavailable for liquidating the 
debts due to depositors. 

It must be admitted, I believe, that we 
have been converting too great an amount 
of liquid capital into fixed forms of invest- 
ment. What is the cure? The cure is, of 
course, to reduce the expenditures of that 
character so that they will come Avithin the 
line of safety. What is the line of safety? 
It is, it seems to me, something well within 
the total income from such investments. 
If we go beyond it, — if we convert into 
fixed forms of property more than the total 
income from the property, — we have gone 
beyond the line of safety and are borrow- 
ing from the future temporarily to bury 
the capital. We have the choice of one 
268 



America's Foreign Commerce 

of two things : Either to practise wise 
discretion or to go on borrowing of the 
future until we are brought up against a 
wall. The first course is consistent with 
continued prosperity, even if we do, to some 
extent, reduce the expenditure of capital 
for new construction, extensions, and better- 
ments. The second course, if persisted in, 
will bring confusion, disorder, and paralysis 
on the whole constructive investment. 

Another phase of this situation, and one 
which has aggravated the causes leading to 
an expansion of loans, and which has cut 
off from us the relief which we hoped for 
in the way of a foreign trade balance made 
tangible by gold imports, has been the rapid- 
ity and extent of the advance in prices. 
Back in 1895 and 1896 we were on a low 
level of prices, and we were imbued with 
economical ideas of administration. It was 
then that we began making the great inroads 
into foreign markets and our exports passed 
the billion-dollar mark. In 1898 our ex- 
ports had so increased and our imports so 
decreased that we had a balance in our favor 
of more than six hundred millions, and that 
balance was tangibly reflected that year in a 
net importation of one hundred and five mil- 
lions of gold. Then prices began to rise, the 
total of our exports did not hold up the next 
year, while our imports began to show a 
269 



Business and Education 

marked increase. In the subsequent years we 
were fortunate in exceptionally favorable ag- 
ricultural conditions, of bountiful harvests at 
home and scantily filled granaries abroad, 
so that our exports showed some further in- 
creases, but our imports went up more rapidly 
than did our exports until, in the fiscal year 
just closed we showed a total of imports nearly 
three hundred millions more than in 1898. 

The whole general level of prices has ad- 
vanced, and some of these advances, from 
the extreme low level of 1897 or 1898 to the 
high level which has been reached within the 
last two years, are the sharpest in our com- 
mercial history. Pig iron, for instance, ad- 
vanced from less than $12 a ton in October, 
1898, to S25 at the beginning of 1900. Steel 
rails doubled in the same period, the price 
going up from $17.50 to $35. Bar iron 
scored even a greater percentage of gain 
within a shorter time, the price advancing 
from 95c. a hundred in July, 1897, to $2.60 
in October, 1899. The quotation for clear 
pine boards has advanced from $45 to $73 
a thousand; for brick, from $4.50 to $6; 
rope, from 5 /4c. to 13c.; and salt, from 
21C. to $1. Take the advance of some of 
the Southern products in that same period. 
We see linseed oil marked up from 29c. to 
68c., turpentine from 26c. to 50c., molasses 
from 28c. to 55c. 

270 



Americans Foreign Commerce 

These extreme advances in prices have 
not been fully maintained, but the present 
level of market quotations is still 50 to 80 
per cent above prices in 1897 and 1898 for 
many commodities. 

So the list might be continued. These 
examples are extreme, and the low level was 
probably unduly depressed. But they tell 
the story of why our exports have failed to 
go on increasing, and they have been an im- 
portant influence in the inflation of bank 
credits. 

When a railroad company had to pay $35 
a ton, as against $17.50, for steel rails, its 
improvements become relatively very costly, 
and its issues of securities against permanent 
betterments must be on a much more liberal 
scale. The cost of production in every di- 
rection has been increased until we find our- 
selves actually importing from some of the 
identical markets that two or three years 
ago were in a panic over our invasion. 

Prices of securities advanced along with 
other prices, and attracted the holdings of 
foreign investors, until we swept the con- 
tinent of Europe almost clean of our stocks 
and bonds, and greatly reduced the holdings 
of English investors. 

We still had an ample total of excess of 
exports, however, and out of our favorable 
trade balance we could pay for reams of 
271 



Business and Education 

securities and still have something left. We 
did not stop at buying our own securities, 
but began making great foreign investments, 
to the astonishment of the financial world, 
turning the tables upon Europe and sending 
a great stream of credit for investment there. 
The result was that by the year 1900, in spite 
of a nominal foreign trade balance of nearly 
five hundred and fifty millions in our favor, 
the net result of the gold movement that year 
was an export of about four million dollars. 
The next year we brought in a few more mil- 
lions of gold than we sent out, and we did the 
same last year, but since 1898 there has, in 
spite of the theoretical trade balance, been no 
significant shipment of gold in our direction. 

There has, however, been a movement in 
international finance, which is not reflected 
in the customs statements. We have been 
building up a floating debt to Europe, made 
up of borrowings in the form of short time 
bills. The exact total of that floating in- 
debtedness at the present time is one of the 
difficult problems of finance, but it must be 
very large. I have heard it estimated by 
financiers in foreign capitals as high as two 
hundred to three hundred millions. That 
estimate, I believe, is far too high ; but, even 
so, the total we must admit is important. 

Particularly is it important in view of 
the statistics of bank reserves, to which I 
272 



Americans Foreign Commerce 

have before referred. In 1899 the national 
banks held 33 per cent of reserve. In their 
vaults was a good part of the one hundred 
and five millions of gold which had come in 
from abroad the preceding year. It was this 
excess of reserve which permitted loans to 
expand one billion three hundred millions 
since that date without adding a dollar to the 
stock in the bank vaults of specie and legal 
tenders. But now we have gone to the limit 
in that respect. This last report shows less 
than 21 per cent of reserve for all the na- 
tional banks of the country. Not one of the 
three central reserve cities was up to the legal 
limit. Twenty-two of the thirty other re- 
serve cities were below the legal limit. 

We have seen what a great expansion of 
deposits and loans both, remember, almost 
wholly but evidences of bank credit, could 
follow the increase in the reserve basis that 
came with the gold importations of 1897 
and 1898. We see from this last statement 
of the Comptroller that the expansion has 
reached the utmost limit possible with the 
present basis of specie and legal tenders. Is 
it not well to ask, What of the future? If 
a hundred-million-dollar importation of gold 
can serve as a basis for an expansion of so 
many millions of deposits and loans, what 
will an exportation of one hundred millions 
mean? Will not the answer lead us to pon- 

18 273 



Business and Education 

der on the probable effect of future gold 
movements? Does our foreign commerce 
give promise of a trade balance great enough 
again to induce gold to flow in this direction ? 
Let us examine recent records. For the 
first nine months of this year our imports 
increased over last year fifty-six millions, 
and it must be remembered that the total 
imports for last year were three hundred 
millions more than in 1898. On the other 
side of the book, our exports for the nine 
months of this year decreased one hundred 
and eight millions, so that the record for the 
nine months shows a net balance one hun- 
dred and sixty-four millions more unfav- 
orable than the corresponding nine months 
of the previous year. In the same time we 
have lost eight millions of gold. For the 
twelve months ending with September our 
favorable trade balance was 420 millions, 
against 641 millions for the previous twelve 
months, a decrease of two hundred and 
twenty-one millions. 

The evidences, then, of advancing prices 
that check exportation and increase importa- 
tion, the absorption of our favorable trade 
balance in foreign investments and in the 
repurchase of securities, the uncertain totals 
of our floating indebtedness represented by 
short-time finance bills, all taken in connec- 
tion with the fact that any reduction of the 
274 



Americans Foreign Commerce 

specie reserve held by banks must be fol- 
lowed by liquidation which will again es- 
tablish the proper relation between reserve 
and deposit liability, would seem at least to 
point to the conclusion that this is not a time 
favorable for the expansion of bank credits. 
I wish by no means to present an alarm- 
ing view of the outlook. What I do wish 
to do is merely to sound a conservative note 
of warning. I believe there are in the situa- 
tion tendencies in which are elements of pos- 
sible danger. On the other hand, I by no 
means forget the long list of favorable con- 
ditions upon the opposite side of the account. 
I have the most absolute faith in our ulti- 
mate commercial ascendency. I believe no 
one who has carefully studied industrial con- 
ditions in this country and in Europe can 
reach a conclusion unfavorable to the pros- 
pect of our own progress. We have the 
cheapest and most nearly inexhaustible sup- 
ply of raw material, the greatest genius in 
the handling of machinery for its conversion 
into manufactured products, the broadest 
single homogeneous market in the world 
upon which to base substantial domestic 
business, which will serve as a foundation 
for foreign commercial conquest. We have 
numerous advantages over our competitors, 
and in the end the combined effect of these 
advantages is absolutely certain to place us 
275 



Business and Education 

foremost in the world's commercial ranks. 
It is in no wise opposed to this view of ulti- 
mate commercial supremacy — a view which 
no one more strongly holds than I do — 
that I have pointed out conditions which I 
believe, if not guarded against, will threaten 
for the time being our continued progress 
toward that goal. A judicious recognition 
of the restricting conditions now visible in 
our financial situation may save us from 
disaster and humiliation later on, — a humil- 
iation from which recovery will be slow and 
painful. If a realization of these dangers 
and an effort to avoid them shall in any 
measure result from what I have said to 
you, I shall consider this opportunity for 
meeting you doubly valuable. 



276 



THE ULTIMATE DEPENDENCE 

OF NEW ENGLAND UPON 

FOREIGN TRADE 

An address delivered before the Commercial Club of 
Boston, March 19, 1903. 

A MOST significant and interesting feature 
of the American commercial situation is the 
marked change which has come in the last 
two years in the attitude of our people to- 
ward foreign trade. In the period just fol- 
lowing the Spanish War, the dominating 
commercial note in this country seemed to 
be sounded in praise of the increase of our 
exports and the extension of the field of our 
foreign trade. That note rose, indeed, to a 
trumpet blast when our exports expanded to 
a point that gave us a favorable trade bal- 
ance of more than $600,000,000 in a single 
year. The commercial world stood aghast 
at the strides we were making in our en- 
trance of the world's markets. It came to 
be called an American invasion — an in- 
vasion without force of arms, but as pro- 
found in its effect as had been, in days gone 
by, the consequences of many a military 
277 



Business and Education 

triumph. The old world was shocked at the 
tremendous pace of our progress. Our total 
exports reached a billion dollars, and we were 
filled with commercial pride, but almost be- 
fore we were used to those figures, they had 
expanded five hundred millions more, and 
reached a point nearly double their average 
in the ten years prior to the beginning of 
this period. In six years Ave sold abroad in 
merchandise, produce, and manufactures two 
billion dollars more than we bought. And 
wx compared that colossal figure of $2,000,- 
000,000 with a foreign trade balance, built 
up from the date of the foundation of the 
Government, through all the years up to the 
beginning of this period, which aggregated 
only one-sixth of that six years' record. 
Our exports of manufactured articles 
jumped $100,000,000 in a year, and fol- 
lowed up that increase by as much more in 
another twelve months, and almost in a day 
we came into successful competition with 
markets which had never before known our 
products, and wx brought defeat in commer- 
cial struggles to great houses which had for 
generations known no successful competi- 
tion. 

This was an invasion indeed, and properly 

we took a great national pride in it. But in 

the last two years this invasion has become 

almost a retreat. Instead of our manufac- 

278 



New England and Foreign Trade 

turers supplying our home demand more 
fully than they had ever supplied it before, 
and wresting market after market from es- 
tablished traditions of the world's trade, we 
have been becoming a better and better mar- 
ket to sell in and a poorer and poorer mar- 
ket in which to buy. Our imports have 
moved up steadily. The volume of our ex- 
ports of manufactures has ceased to show 
the wonderful expansion which marked its 
period of development when was coined the 
phrase, the American Commercial Invasion. 
Not only have the statistics of the situa- 
tion changed, but our mental commercial 
attitude has changed. There has been radi- 
cal variation in the emphasis of our com- 
mercial development. We find to-day a 
great many people who believe that this 
sudden loss of interest in foreign commerce 
is a natural reaction from an abnormal con- 
dition. They declare that a nation whose 
undeveloped resources are as vast as those 
of the United States had best confine its at- 
tention to its home field ; that a nation where 
the possibilities of internal development are 
only beginning to be realized, even in local- 
ities long since fully settled, offers, in its 
great homogeneous markets, attractions to 
our manufactures which make any possibil- 
ity of foreign trade expansion look small and 
cramped. They believe that a nation which 
279 



Business and Education 

has, within a decade, increased the capital 
invested in its manufacturing enterprises by 
three and one-half billion dollars, a nation 
which, in that same ten years, has shown a 
growth in numbers exactly equal to the 
whole population of Mexico, offers internal 
opportunities greater than can possibly be 
found in the well-worked markets of the old 
world. A nation, they think, which has in- 
creased its actual production of coal in a 
decade by almost as much as the whole pro- 
duction of its greatest competitor at the be- 
ginning of that period, which has nearly 
doubled its output of iron in the same length 
of time, and in that field also passed all com- 
petitors, and which, for both of these great 
products, is offering a home market so keen 
that no thought of export can be entertained, 
a nation which embraces all resources and 
all zones within its boundaries, — such a 
nation, they believe, in the very nature of 
things, cannot be permanently dependent 
upon foreign trade. They point to the rela- 
tive unimportance of even our expanded 
foreign trade if we compare it with the 
vastly more rapidly expanding domestic 
commerce. Measured by whatever stand- 
ard one will, they say, the predominating 
importance of the domestic markets is em- 
phasized. 

I do not follow that line of reasoning al- 
280 



New England and Foreign Trade 

together. I admit that it has great force 
and, speaking broadly for the whole country, 
I believe that paramount to any possible con- 
sideration of foreign trade, in the present 
day at least, is the importance of the devel- 
opment of our domestic markets, and the im- 
portance, — and I would particularly em- 
phasize this point, — of keeping corporate 
and financial methods directed along right 
economic lines which will leave these vast 
internal commercial interests free to follow 
their natural lines of expansion. Those gen- 
eral considerations, however, are not equally 
applicable to all parts of the United States. 
Least of all, I believe, do they apply to the 
situation of New England. The Middle 
States, the Mississippi Valley, and the South 
may, indeed, look forward to a commercial 
future whose confines need not extend be- 
yond the national boundaries, but I believe 
that for the New England States any large 
measure of future prosperity must be sought 
farther afield. 

You gentlemen of the Commercial Club, 
you who have been a part of the proud com- 
mercial life and development of New Eng- 
land, do not need to be told of the intimate 
identification of the New England States 
with the industrial growth of the whole 
country. The view which I have per- 
sonally had has emphasized in my mind 
281 



Business and Education 

the important influence of the New Eng- 
land commercial life upon the development 
of the West. It is the view of the outsider, 
the Westerner, but it leaves me none the 
less filled with respect for New England's 
business traditions, New England's enter- 
prise, New England's initiative, New Eng- 
land's commercial character. I hardly 
need to recall, here in this assemblage of 
Boston commercial men, anything of the 
historical development of New England's 
commercial position, anything of the time 
when the foreign commerce of the country 
centred at this port, of how New England 
built the ships of the country, and how New 
England's merchants were the boldest and 
most successful traders in all the world's 
commerce; nor do I need to speak of these 
same characteristics in the development of 
New England's industrial life, how the great 
manufacturing industries found their begin- 
nings here, — the textile industries, the ma- 
chine-tool industries, the rubber and leather; 
even, if we go back to Revolutionary times, 
we find the iron and steel industries, in their 
national beginnings, nurtured in the con- 
genial atmosphere of this Commonwealth. 
For a time New England was largely self- 
centred, her own people were busy develop- 
ing her own resources. The accumulations 
of half a century of profitable trade became 
282 



New England and Foreign Trade 

the greatest available fund for the develop- 
ment of Western prairies and for opening 
Western mines. Great railroad corpora- 
tions, expanding from trunk lines into sys- 
tems, were built up and controlled by New 
England capital. But better than the send- 
ing forth of capital, better than the building 
of railroads, the opening of mines, the or- 
ganization of banking institutions, was the 
impress of men with New England charac- 
ters, who went forth to all the States from 
Ohio to the Pacific, so that a greater New 
England has come to stretch clear across the 
continent, and New England methods and 
New England consciences are leaven in the 
commercial life of the great cities of the 
West away on to the shores of Puget Sound. 
An unusual phenomenon was at last pre- 
sented. Attracted on the one hand by the 
high wages of the West, and on the other 
by the free lands, and at home pressed by 
the competition of Western wheat and cat- 
tle, the rural New Englander, by thousands, 
sought more attractive occupations. The 
Western States took up the task of feeding 
the fast-growing populations of the mill 
towns, sending their food-stuffs and raw 
materials in exchange for the manufactured 
goods which they could not yet make in the 
West. New England may be credited with 
a vast influence in the Western expansion 
283 



Business and Education 

of the United States, because she furnished, 
more than any other part of the country, 
the men, the money, and the manufactures 
which made that expansion possible. 

That moA'ement, however, has been largely 
accomplished. The South and the West are 
now in a large degree equipped with the 
machinery of civilization. They are no 
longer under tribute for men or products, 
and in great measure are also becoming 
financially free, the last few years of pros- 
perity having discharged vast indebtedness. 
The position which Xew England held as a 
manufacturing source to supply the Avants 
of the AA'est and South, has in turn been con- 
tested and in large measure lost. The great 
cities of the AA^st and South have changed 
their distinctive character as distributing 
points, and have become manufacturing cen- 
tres in turn. The remarkable expansion of 
the cotton industry in the South, the rapid 
groAvth of leather manufacture in the \A'est, 
taking from Xew England its prominence 
in both fields, are but two illustrations 
among many. In a decade the cotton mills 
of the South increased the A^alue of their 
output from S40.000.000 a year to nearly 
$100,000,000; while in the same time the 
increase in the output of the cotton factories 
of Xew England has been but little over 5 
per cent. The boot and shoe industry in 
284 



New England and Foreign Trade 

the West has shown even greater expansion. 
A development of signal significance to the 
future prosperity of New England can be 
found in the rapid expansion all through the 
West of the manufacture of all sorts of 
highly-finished goods. Communities that 
have heretofore been confined to the pro- 
duction of food-stuffs and raw or roughly 
finished materials, have come into sharpest 
competition now with some of your longest- 
established industries. The lines in which 
the manufacturers in the East, and particu- 
larly New England, had until recently a con- 
trol approaching to monopoly, are now being 
diffused over the very territory which these 
factories of yours once almost exclusively 
supplied. 

The industrial future of the United States 
certainly lies in the complete development of 
the resources of every state, not merely in 
agriculture, mining, and lumber, but in man- 
ufacturing as well. And so, when we look at 
it properly, we can but approve of this de- 
velopment, which will realize dreams of in- 
dustrial independence to many communities. 

New England is deeply concerned in this 
change. It is impossible to conceive that her 
industries are to be permitted to decline, and 
still, if there is to be such radical modifica- 
tion of commercial and industrial lines, does 
it not inevitably point to the necessity for 



Business and Education 

New England looking toward new fields? 
I do not for a moment believe that any ten- 
dency of our industrial development as a 
nation is going to result in industrial de- 
cadence in New England. Industrial civil- 
izations which are rooted deep in the solid 
rock of established prestige, and which are 
fortified by a century's accumulation of tech- 
nical and financial equipment, are not sud- 
denly torn up and transplanted to new local- 
ities, even though those localities may be 
found more favorable for economical pro- 
duction. It is not with any sudden wrench 
that industrial supremacy passes from a 
state. There may be a gradual decrease in 
the number of new enterprises, a settling of 
the population into a stationary condition, a 
slower development of new railroad facil- 
ities, a relative decline in wages, a level con- 
dition of bank deposits. Evidences such as 
those may be read as indicative of most im- 
portant new influences. If they are read in 
connection with the statistics of heretofore 
undreamed-of expansion in other localities, 
they may be taken as quite serious enough 
to command the best thoughts of such groups 
of men as compose this Commercial Club, 
but they do not necessarily foreshadow de- 
cadence unless you who make up this com- 
mercial life sit idly by. 

They must, it seems to me, arouse new 
286 



New England and Foreign Trade 

initiative, demand greater energy and keener 
thought, an intelhgent questioning as to 
what directions the new development shall 
take if the old lines have encountered insur- 
mountable obstacles. 

New England's bank capital is not in- 
creasing. Her bank deposits are taking slow 
steps forward, compared with the gigantic 
strides which the country elsewhere has 
shown. Your stock exchange shows no 
great evidence of new corporate development 
within New England itself. New England 
capital is far more active in Southern cotton 
mills than it is at home. Other states, 
whose railway development was long since 
apparently complete, are spending hundreds 
of millions upon improvements and better- 
ments, but New England railroad compan- 
ies are doing comparatively little. Railway 
traffic here has increased less rapidly than 
in any other part of the country, and, finally, 
one of the most significant tests, the skilled 
American labor which has built up the man- 
ufacturing supremacy of New England is 
not maintaining its proportion to the popu- 
lation. The increase in the population of 
New England is largely an increase of the 
foreign-born. 

Such general indications as these may 
have less significance than appears to me. 
You can judge of them and know better 
287 



Business and Education 

what modifying influences and conditions 
should be taken into consideration, but it 
certainly is not an answer to say that New 
England has reached a stationary condition, 
has touched the limit of her commercial pos- 
sibilities, and that, while other localities are 
uncovering new resources and making vast 
development. New England industries should 
be expected only to pursue the even tenor of 
their way, content to maintain the position 
which they have achieved, but bound within 
limitations of natural resources and condi- 
tions which cannot be broken through. That 
attitude of mind would, perhaps, be comfort- 
able, but I do not believe it is tenable. 

It is trite to say tha,t neither state nor in- 
dividual may stand still — that they must 
either go forward or backward. Trite as it 
is, however, it is particularly true in the 
fields of commerce and industry. When a 
locality no longer holds out attractive re- 
wards to skilled industry, when there is no 
longer room for the new-comer, when a 
stationary condition has been reached, ex- 
perience has abundantly proved that such a 
locality is in danger of decadence. The ac- 
tive emigrate, surplus capital is invested in 
other fields, the competitive advantages 
which long years of struggle have attained 
are not preserved, — a community which 
has reached such a condition and rests con- 
288 



New England and Foreign Trade 

tent with what it has obtained, is ultimately 
in grave danger of being hurt by the com- 
petition of its more vigorous rivals. 

Do not understand me as saying that New 
England stands in that position. I would 
not go further than to suggest that some 
broad indications point to a possible ap- 
proach to it, that market conditions have 
undergone radical changes, more radical, 
perhaps, in their significance, than some of 
you who are close to local conditions here 
have fully realized. Conditions which have 
made the great industrial growth of New 
England possible are changing. Some of 
your advantages, I believe, are passing away. 
The markets upon whose contributions New 
England has thriven are declaring inde- 
pendence, and every one of these indications, 
it seems to me, points to the necessity for 
some new outlet for your manufactured 
products. 

Such outlet is to be found in foreign mar- 
kets. It seems to me that New England is 
so situated, geographically and industrially, 
and is so equipped in the temperament, abil- 
ity, and energy of its people, that it is the 
most natural thing to expect — indeed, it 
is the perfectly logical sequence of historical 
development — that the head and centre of 
a great foreign trade development should be 
found here. I am firmly convinced that we 
19 289 



Busmess and Education 

have as a nation the elements which would 
enable us to establish ourselves in high posi- 
tion in the markets of the world. We have 
the raw material, and we have an unequalled 
genius for mechanical labor, and, of impor- 
tance almost as great as these, we appreciate 
the value of organization, of combination, of 
doing things broadly and in great volume. 

While our foreign trade record of two or 
three years ago, and, indeed, the record of 
to-day, is one oi which we may well be 
proud, I believe that it marks only the first 
beginnings of what we may have in the way 
of foreign trade if we will seriously devote 
some of our best energies to it, if we will put 
into the work of establishing ourselves in 
the foreign markets some of the same en- 
ergy, intelligence, and genius which we have 
put into the development of our internal 
industrial affairs. 

This foreign trade of ours, vast as it is, 
has been an almost haphazard growth. 
Sometimes, when business was slack, or the 
desire for a European vacation strong, a 
manufacturer would take a glance at the 
European field, with a result possibly of 
some good beginnings in the way of trade. 
Too frequently, however, these good begin- 
nings have not been followed up. If orders 
arrived when business had turned active 
again, they were ignored. We have lacked 
290 



ISJew England and Foreign Trade 

system, we have lacked persistence, we have 
lacked, in this field, numberless qualities 
which we really have in abundance, and 
which, if applied to foreign markets would 
bring forth splendid results. 

Almost universally we recognize the ne- 
cessity for association and organization. It 
is a part of our political creed. It has in the 
last few years become the cardinal principle 
of our commercial life, and here in the 
United States, more than anywhere else in 
the world, is seen the very highest develop- 
ment of commercial co-operation, co-ordi- 
nation, organization, combination. Seeing 
that as clearly as we do, having before us at 
the moment the most remarkable illustra- 
tions of the effect on commercial life of or- 
ganized and consolidated effort, it seems 
strange that we have as yet so dimly recog- 
nized the prime necessity of the application 
of these same principles of combination and 
organization to the building up of a foreign 
trade. I believe that a recognition of that 
and a crystallization of that recognition into 
a great, well-organized movement embrac- 
ing the widest interests, having the most 
intelligent direction, and controlling the nec- 
essary credit and capital, would enable this 
country to make a great impression upon 
the foreign markets with its manufactured 
products. 

291 



Business and EdiLcation 

These are general observations. Suppose 
I try to make the illustration a little more 
specific, but in doing that I beg you to re- 
member that I am but an observer of the 
practical workings of foreign trade, and that 
I merely have gathered from a rather wide 
opportunity for observation what seem to 
me a few well-grounded principles. 

If I were to try to put in a few words some 
of the main difficulties which seem to me to 
hamper the development of our foreign 
trade, I would say that they chiefly consist 
of a lack of continuous intelligent representa- 
tion in the foreign markets, the absence of 
proper facilities for the exhibition of sam- 
ples, and bringing to the attention of buyers 
the variety, quality, and grade of goods 
which we have tO' offer, the stubbornness of 
our manufacturers in meeting the specific 
peculiarities and requirements of localities, 
our disinclination to vary from those stand- 
ards which have, in their time, enabled our 
manufacturers completely to outdistance all 
the rest of the world in many directions; 
the failure of our manufacturers to quote 
prices for products laid down in the buyer's 
market, so that the difficulties and uncer- 
tainties of calculations of foreign money 
values, of exchange rates, of shipment 
charges, are eliminated; and finally, and of 
almost as much importance as all else, the 
292 



New England and Foreign Trade 

indifference of our manufacturers toward 
taking any steps looking to a proper consid- 
eration of credits of foreign buyers, an al- 
most rigid attitude of demanding payment 
when the goods go on shipboard. 

If I am right in discerning these as some 
of the chief obstacles in the way of a more 
rapid extension of our position in the foreign 
markets, then I believe a plan which might 
operate to remove these obstacles is such 
a combination of interests of our exporters 
as will make it possible for the exporting 
interests of the United States to be con- 
tinuously and intelligently represented in 
the foreign markets. Just for the pur- 
pose of putting a thought in your minds, 
crude, perhaps, in its first formulation, 
but having in it, I believe, elements which 
would make for a tremendous development 
in our export trade, let us suppose that 
we had an organization of great financial 
strength, having in it the right elements 
of our own commercial and manufacturing 
life, and projected for the purpose of en- 
ergetically and intelligently representing 
broadly our exporting interests in the 
world's markets. Suppose such an organ- 
ization should establish exhibition rooms 
in various centres of trade throughout the 
world, having there expert salesmen and 
engineers equipped for the work of repre- 
293 



Business and Education 

senting these products, — men equipped with 
technical training, with knowledge of the 
language, and with good understanding of 
both domestic and foreign conditions. Sup- 
pose such an organization should stand be- 
tween purchaser and producer, guaranteeing 
on the one hand the delivery of goods ab- 
solutely according to sample, on the other 
hand guaranteeing the credit of the pur- 
chaser. If such an organization were 
equipped with men of trained intelligence, 
keen observers of commercial conditions, 
who would be quick to see an opportunity 
and to devise means of grasping it, and if 
that organization had behind it the co-opera- 
tion of great manufacturing interests here, 
I believe wonders could be accomplished. 

AA'hile Europe has the greatest respect for 
our industrial capabilities, there is not an 
old-world manufacturer who does not look 
upon many of our crude methods and hap- 
hazard intermittent efforts in the field of 
international trade as his refuge of safety 
from a competition which could not other- 
wise be repelled. Systematic organization 
and training of men for work which you in 
New England once knew^ how to do well, 
but which the rest of the country has never 
known much about, a permanence of effort 
and greater flexibility in our manufacturing 
standards, those are the things that are 
294 



New England and Foreign Trade 

needed to press our foreign trade into the 
position it should rightly occupy. 

There are no people better qualified for 
such a struggle than the commercial classes 
of New England. It is going to need educa- 
tion, but you have here the facilities, better 
than anywhere else in the country, if you 
will but bend them to the needs of this situa- 
tion. Train men to know the commercial 
world and to know the commercial methods 
of other people than our own; train them 
in language, do for them what is being so 
well done by the commercial schools of 
Germany, and they will repay the effort. 

I can think of no more fruitful field of 
inquiry for this Commercial Club than that 
of the need of a school for training young 
men for international commerce. I believe 
if you would make a study of that question 
and would come to realize what a great 
impetus could be given our foreign trade by 
a school which would turn out young men 
thoroughly equipped to enter such a field of 
activity, you would find yourselves enthusi- 
astic advocates of some radical departures 
in education, and if, as a result of such inves- 
tigation, you should graft on to one or more 
of your great institutions of learning a 
course intelligently designed for this pur- 
pose, you would not only be offering golden 
opportunities to your young men, but you 

295 



Business and Education 

would be placing the whole commercial 
country under another debt of obligation to 
you, because you would again be ready to 
send out into a new field New England men, 
with New England characters, equipped for 
their task with New England thoroughness. 



296 



POLITICAL PROBLEMS OF EUROPE 

AS THEY INTEREST 

AMERICANS 

I. The Awakening of Interest in 
European Affairs 

Our interest in European affairs has been 
undergoing- marked change in the last gen- 
eration — even in the last half dozen years. 
We do not need to look back far to remem- 
ber the time when we had little concern in 
world politics. Questions of European pub- 
lic policy, the tendencies of political currents, 
and the objects of national ambitions, were 
without practical interest to the average 
American. Even European war meant in 
our minds only that we were to sell more 
wheat and provisions, and we looked with 
greater interest at market quotations than 
we did at the questions which might involve 
nations in conflict. We were not only out- 
side the range of the game of European 
diplomacy, but we lacked reason for having 
a keen, practical interest in European social 
and industrial conditions. 

We were concerned with Europe's general 
prosperity, for Europe bought our produce; 
297 



Business and Education 

but the training, efficiency, and organization 
of European labor, the effect upon industrial 
progress of current legislation and of socio- 
logical tendencies, all had more of an aca- 
demic than a practical interest for us. Im- 
portant as was our foreign trade, four-fifths 
of our exports were the direct products of 
the farms, ranches, and forests. Our fields 
could fear no rivalry, and our workshops 
had not begun to challenge competition. 

With the military and industrial successes 
of the last half dozen years, however, have 
come many and far-reaching changes. Not 
only is our present interest in world politics, 
in its relation both to our own political sys- 
tem and to our national ambitions, a matter 
of recent growth, but we have another quite 
immediate interest in the political conditions 
and development of other nations — an in- 
terest that leads us to measure the effect 
of national conditions and development on 
the efficiency of industrial and commercial 
competitors. 

Now that we have taken our place in the 
first rank as a manufacturing nation and can 
see an inevitable destiny leading us toward 
world-industrial competition, all the ques- 
tions affecting the relative efficiency of the 
other great industrial countries in competi- 
tion with us in the world markets become 
of practical importance to every American. 
298 



Political Problems of Europe 

The farm boy, the shop apprentice, the clerk, 
the worker in every field of American life, 
must henceforth have a more and more inti- 
mate personal relation to European condi- 
tions, problems, and tendencies. That is true 
because the conditions that are affecting our 
great industrial competitors, the problems 
with which they are concerned, the difficul- 
ties which they are encountering, the suc- 
cesses which give them fresh courage, will 
all have an increasing influence upon the net 
results of the day's work of the average 
American. 

For these reasons I believe that we are 
ready to give a more intelligent study to 
European conditions, and that it will be 
practically worth our while to gain a clearer 
comprehension of the political life of other 
nations, and of their social and industrial 
problems, and the efforts directed toward 
their solution. I believe that we are com- 
ing to recognize that we need something 
more than the bare facts regarding impor- 
tant events. We need to comprehend under- 
lying causes. We need to understand more 
of the perspective and the significance of 
foreign events in their relation to our own 
affairs. It is important, too, that we not 
only keep abreast of those events which con- 
stitute live news in the mind of the cable 
editor, but that we should understand those 
299 



Business and Education 

social and industrial conditions, those cur- 
rents of public thought, those national and 
racial attitudes which have now all come 
to form subjects of distinct practical interest 
to us, because they are matters directly re- 
lated to our pocket-books, matters with 
which our material prosperity must hence- 
forth have definite concern. 

I am profoundly impressed with the im- 
portance of the awakening interest in Euro- 
pean affairs and of the value of the clear 
observation of these affairs through the eyes 
of practical American business men. The 
more rapidly we lose some of our com- 
placence and come to recognize that while 
there are many things that we do better 
than other people, there are many other 
things that we do worse, the sounder will 
be our understanding, both of our own re- 
sources and the strength of our competitors 
in the international industrial development. 

In the old days, when a man had passed 
through his apprenticeship in some trade, 
his ambition impelled him to travel from 
one centre to another and observe the art 
and learn the methods that were practised 
wherever his trade had gained pre-eminence ; 
and after this travel and observation he was 
proud to call himself a " journeyman work- 
man." That is the German custom to-day, 
and there we find not only journeymen 
300 



Political Problems of Europe 

craftsmen, but journeymen manufacturers, 
merchants, and bankers — men who are ob- 
serving with intelhgence and minute care 
the methods and practices of their interna- 
tional competitors. Just such observation is 
healthful for us. While it will cause the 
American journeyman to lose much of his 
Yankee complacency, it will in the end give 
him the firmest foundation upon which to 
rest his national pride and hopes for the 
national future. It is merely as a " journey- 
man " business man that I should try to 
write of some of the European conditions 
which have come under my observation, and 
which seem to me of practical interest to 
other Americans. 

In a survey of Europe which seeks to 
examine the qualities of nations as indus- 
trial competitors, present and prospective, 
the fundamental consideration must be the 
stability of governments. Political stability 
is an absolute prerequisite to industrial pros- 
perity. Where the energies of a people are 
constantly diverted to the settlement of polit- 
ical questions, the advance of commerce and 
industry is greatly hindered. Stability of 
conditions is the foundation on which great 
commerce is built. A period of stability in 
our own political conditions is always recog- 
nized as most favorable to business develop- 
ment. The possibility of a change in money 
301 



Busmess and Education 

standard or in customs tariff unsettles every 
branch of commerce. The pohtical stabihty 
of our industrial rivals is a consideration of 
the most practical importance to every one 
concerned in our commercial life, and in any 
analysis of the strength of our competitors 
that is the first phase of the subject to 
investigate. Is industrial development in 
Europe to go forward under about the same 
political conditions as now exist, or do the 
growing expenditures and increasing debts, 
the weight of military organization and of 
naval requirements, the growth of socialism 
and the unsettling of established conditions, 
all combine to endanger the European polit- 
ical fabric and threaten essential modifica- 
tions of government which will affect the 
whole commercial and industrial life? Is 
the map of Europe drawn in indelible colors ? 
Will the development of commerce and in- 
dustry proceed with as much protection and 
aid from the government and with no more 
obstacles and disabilities than now? Are 
the dangers of wars imminent? Are the 
economies of peace secure? Answers to 
these questions must all have immense in- 
fluence on the future of our industrial 
competitors. 

Since the impetus which the Czar gave 
to the arbitration movement through the 
Hague Conference there has been much 
302 



Political Problems of Europe 

progress — progress that has been recently 
emphasized by the conchision of treaties 
between England and France, France and 
Italy, Sweden and Denmark, and which 
may even record the striking achievement 
of an arbitration treaty between France 
and Germany. These treaties, however, 
are little more than expressions of national 
good-will. 

It is in France that the arbitration move- 
ment has shown the greatest vitality. The 
well-directed efforts of the Baron d'Estoiu'- 
nelles de Constant have been largely re- 
sponsible for this. He has, within a few 
months, built up a group of more than one 
hundred deputies who, while still affiliating 
with various other groups in the Chamber, 
form a tolerably compact organization in 
favor of international arbitration. The ex- 
penses of militarism, the increasing budgets, 
the growing difficulties in the effort to make 
taxation equal government requirements, the 
constant and enormous additions to the per- 
manent national debts, all spell ruin for the 
great powers of Europe in the mind of the 
Baron de Constant. He is most pessimistic 
in regard to the financial future of the 
nations of Europe if military expenditures 
are to keep up to their present scale. 

The Baron de Constant impressed me as 
a man of tremendous earnestness. The 

303 



Business and Education 

strength of his behef in his own pessimistic 
picture of the future of Europe, unless the 
tendency toward increasing armament and 
ever-growing expenditures is checked, un- 
doubtedly has given him great influence, 
not only in the French Chamber, but with 
the political leaders of other nations as well. 
When he talked to me of the financial ruin 
which he saw ahead, and of the certainty 
of war which must result b}^ the time the 
growing strain of militarism reached the 
inevitable breaking point, he impressed me, 
not alone with his earnestness, but with the 
force of his reasoning and the gravity of 
the peril which he sees. It is not surpris- 
ing, in view of the budget and balance sheet 
of France, that a Frenchman sees this peril 
with special distinctness. The success which 
the Baron de Constant has met with in 
bringing together a working group in the 
French Chamber and in successfully com- 
pleting a treaty with England is great 
enough to entitle him to high credit as a 
statesman. For many years there has been 
in France a most intense national prejudice 
against England — prejudice that has fre- 
quently descended to scurrilous abuse, and 
it is certainly remarkable to find so marked 
a reversal of public sentiment in the few 
months which have intervened between not- 
able exhibitions of that prejudice and the 

304 



I 



Political Problems of Europe 

recent acclaim over the completion of an 
arbitration treaty and the establishment of 
a cordial international feeling. 

While great credit is due to the Baron de 
Constant for his efforts in giving practical 
form to this change in national feeling, the 
really potent influence was that of King 
Edward himself. When he planned a royal 
visit to the French capital, it was in the 
face of abusive criticism of England over 
the Boer War. His courtesy, tact, and 
good-humor produced a remarkable effect 
on the national temper of France. The re- 
turn visit of President Loubet and the hearti- 
ness of the greeting which London gave 
him — a greeting more hearty, it was said, 
than he had ever received in Paris — was 
all that seemed needed to win the volatile 
French affections, and suddenly the whole 
race of journalists began to discover rea- 
sons for most brotherly cordiality between 
Frenchmen and Englishmen. All this 
worked in happily with the arbitration 
movement in the Chamber. There fol- 
lowed a visit of the arbitration group to 
London as the guests of Parliament, and a 
return visit of Parliamentary members as 
the guests of the French Chamber, and from 
this interchange of courtesies have resulted 
real understandings and sympathies such as 
have been markedly lacking before in the 

20 305 



Business and Education 

international relations between those two 
great powers. 

The effect of royal visits, the great diplo- 
matic significance that attaches to them, 
and the genuine influence which they have 
in shaping the public opinion of entire na- 
tions, are among the aspects that strike an 
American observer as peculiarly interesting 
in European politics. Within the last few 
months in addition to the interchange of 
courtesies between the King of England 
and the President of France, there have 
been important visits by the Italian king 
to France and Germany, one of which had 
almost as marked effect in producing cordial 
national feeling between two nations as had 
King Edward's visit. Another royal visit 
that vv^as planned, that of the Czar to Rome, 
was interfered with for some reason, and 
European journalists wrote endless columns 
of speculation in regard to the reasons for 
the change of royal plans. 

The arbitration movement is undoubtedly 
gaining force; and still, at best, it is but 
binding warriors with threads. No one for 
a moment believes that any number of arbi- 
tration agreements or Hague Tribunals 
W'Ould hold in check a military movement 
when ruler or people were once aroused. 
Without doubt such agreements may do 
much to harmonize international prejudice 

306 



Political Problems of Europe 

and may be of great use in preventing fric- 
tion over small differences — friction which 
sometimes grows into animosities demand- 
ing national bloodshed. Their usefulness is 
acknowledged by most of the statesmen of 
Europe, but no nation shows any inclina- 
tion toward abating one jot of its military 
programme. 

Increasing armament, larger armies, more 
expensive defences, and more thorough prep- 
aration is the order of the day everywhere 
in Europe. In conversation with public men 
and with many commercial and industrial 
leaders, I have never heard the opinion ven- 
tured that the leading powers of Europe are 
likely in the near future to disarm, or, in- 
deed, materially to reduce their military ex- 
penditures. The German Socialists, it is 
true, make the reduction of such expendi- 
tures one of the principal planks of their 
platform, but in the same speech in which 
Herr Bebel arraigns the Government for 
excessive military expenditures, he castigates 
it for doing nothing to check the aggressive 
policy of Russia. There is plenty of grum- 
bling over the taxes which support these vast 
armaments of Europe, but there is no deep- 
seated conviction in the minds of any con- 
siderable portion of the people of any of the 
great powers that their own nation should 
set the example of a reduction of military 

307 



Business and Education 

and naval strength. Few things in Europe 
can be predicted with more certainty than 
that the outlay for defence and for aggres- 
sive strength will continue. 

The bankruptcy of Europe, which such 
men as the Baron de Constant see, is per- 
fectly easy of demonstration by any ama- 
teur statistician, who needs only a series of 
budgets and a short lead-pencil thoroughly 
to demonstrate such a conclusion; but so 
easily reached a conclusion might be wrong. 
I believe that it would be. It is true that 
the cost of the military establishment, the 
vast expenditures in constructing navies, 
the constantly recurring budget deficits, the 
terrible weight of taxation, are all real and 
painfully evident facts. France is the nat- 
ural place to look for these pessimistic 
opinions in regard to the future of the great 
powers, for France has a debt incompar- 
ably the greatest in the world, and a debt 
that seems ever growing. To-day it stands 
roundly at $6,500,000,000, a debt so great 
that every voter in France — and there is 
universal manhood suffrage there — every 
voter in France has a share of responsibility 
for the national debt equal to $844. It is 
small wonder that this vast debt should give 
rise to apprehension. Only the unparalleled 
thrift of her own people has enabled France 
to market the tremendous blocks of rentes 
308 



Political Problems of Europe 

which have been the legacies left her by one 
finance minister after another. During the 
years of peace the succession of budget 
deficits have made almost as great increases 
in the debt of France as had formerly been 
piled up by the misfortunes of war. So it 
is easy to see how a Frenchman, with mind 
imbued with the great military expenditures 
and growing debt of his own country, should 
look out over Europe and note the cost of 
the great armies and see the stream of taxes 
that runs into the sea that navies may float 
there — sees everywhere a tendency toward 
increasing government expenditures and 
threatening deficits and nowhere means of 
escape through taxation, because taxation is 
already perilously high ; it is no wonder that 
such an observer sees in the constant in- 
crease of government obligations an ulti- 
mate financial collapse and political disin- 
tegration of a character which might readily 
disturb the balance of power in a way no 
army could check nor treaty stay. 

In spite of all that there is to sustain such 
pessimistic views, I am certain that the men 
most powerful in shaping the affairs of 
Europe do not see, at least in anything like 
the immediate future, any reason to believe 
that in Western or Central Europe there are 
to be radical political upheavals, sweeping 
social changes, or the financial break-down 

309 



Business and Education 

of governments. The exception is the near 
East, the Balkan firebrand, where there are 
irreconcilable differences and implacable 
racial antagonisms, seething under impos- 
sibly bad government, and where, sooner or 
later — where, indeed, both sooner and later, 
for no single war can settle those vexed 
questions — there may be seen the fall of 
old governments and the upbuilding of new, 
the end of dynasties, and the creation of 
new national combinations. In the near 
East there is always imminent a catastrophe 
which might iuA^olve all Europe in conflict. 
I am by no means rash enough to venture 
opinions of my own in regard to the polit- 
ical future of Europe. The question is too 
complicated, the undercurrents too many 
and too important, for the casual observer 
to reach more than a superficial conclusion. 
I have been fortunate, however, in meeting 
men of great importance in both the busi- 
ness life and Government councils of most 
of the capitals, and the impression which I 
have of Europe's political future is the com- 
posite of interviews Vv'ith men whose opin- 
ions are worth attention. The impression 
which these conversations has left is one 
of political stability, one which leads to a 
strong belief in the unlikelihood of immedi- 
ate radical changes. There may be social- 
istic triumphs, there may be growing parties 
310 



1 



Political Problems of Europe 

with programmes of revolt against the ex- 
isting form of government, there may be 
burdensome taxation and great miHtary ex- 
penditures; and still, if one takes up one 
nation after another and analyzes its posi- 
tion in relation to the whole fabric of Euro- 
pean politics, the practical man will, I be- 
lieve, conclude that Europe is likely to go 
on for a great many years very much as 
it has been going on for a good many years 
past. 

Take the situation in revolutionary 
France, the country that has had more ex- 
perience in constitution making than all 
others in Europe. France is to-day really 
one of the most stable of European gov- 
ernments. There is small likelihood of 
France becoming involved in any war, and 
the reason for that does not lie in this great 
wave of popular approval of arbitration 
which is just now such a manifest feature 
of French politics, but lies much deeper. 
France has no serious ambitions for an in- 
crease of European territory. Alsace-Lor- 
raine is a poignant regret, but not a military 
ambition. Perhaps the one dominant char- 
acteristic of the French nation as a whole 
is its penurious thrift; and every holder 
of F. loo rentes is an advocate of peace 
because the economy of peace appeals to his 
pockets. 

311 



Business and Education 

But the real reason why France may to- 
day be set down as among the most pacific 
of nations hes in this fact : France is not 
so much a repubhc, not so much a govern- 
ment administered by the voice of the peo- 
ple, as it is an oligarchy. The Government 
of France is really a government by a polit- 
ical dynasty, by a group of men and their 
political heirs, who have made a business 
of governing France, and, having left to 
them the centralized instrument of the Na- 
poleonic system, have governed France, not 
particularly as a majority vote of the nation 
might have dictated, but as they have best 
seen fit — with some patriotism for France, 
and with much regard for their own place, 
power, and perquisites. This political dy- 
nasty has no disposition to risk anything on 
war, for war would mean one of two things. 
If it ended in defeat, it would mean that 
the French nation would rise up, as it al- 
ways has risen when its sensibilities were 
really smitten, and the whole dynasty would 
be irrevocably tumbled out of office, to say 
nothing of the prospect of upsetting the 
form of government itself. But a military 
victory to France would have in it quite as 
distressing possibilities for her political dy- 
nasty as would a military defeat; for a 
military victory would mean a military hero, 
and France can never be trusted not to lose 
312 



Political Problems of Europe 

her heart to a military hero. So sharply is 
this always in the mind of the Government 
that when the nations had a bit of police 
work to do at Pekin, and under hardly any 
conceivable development could thereby gar- 
ner many military laurels, the man who, by 
every right of precedence, position, and 
ability, should have gone into the Far East 
at the head of the French troops was kept 
at home, and a man was selected with abil- 
ities of a type that left no fear in the mind 
of the Government about his ever becoming 
a military idol. 

France may give us occasional exhibitions 
of political turmoil. It is not improbable 
that the socialistic sentiment in France will 
continue to grow, and that there will be some 
evolutionary changes in government; but I 
believe that the solidity of the republic may 
be set down as one of the practical certainties 
of European politics, and that so far as the 
future of France, as a world-industrial com- 
petitor is concerned, we may count upon her 
industries being developed without serious 
interference from any political change. 

If we turn to Germany we find there on 
the face of things much that might indicate 
impending radical political change. There 
is certainly political progress there — prog- 
ress toward individual liberty and political 
equality, progress toward really representa- 

3^3 



Business and Education 

tive government. If one were to try to put 
into a single phrase the significance of the 
pohtical currents and tendencies, the real 
essence of the vital political life of Germany, 
it could well be said that it is to write 
" truth " into the constitution. Germany's 
constitution contains many fair-sounding 
provisions for liberty and equality, but it has 
not, in fact, furnished either liberty or equal- 
ity to the humble German citizen. The con- 
stitution says that every man shall have 
equal justice, that every man shall be eli- 
gible to public office, and that there shall be 
fairness of franchise and of voting repre- 
sentation. In the practical operation of gov- 
ernment none of those guarantees is fully 
kept. 

The political life of Germany probably 
has a more direct practical interest for the 
American citizen than does that of any other 
Continental nation, for many of their polit- 
ical questions and their legislative problems 
directly concern us. That is true because 
of the barriers they are putting up against 
our exports of food products, and because 
of the work which the Government is doing 
in education and in legislation affecting 
social conditions — legislation that has most 
pronounced effect upon the efficiency of 
industrial competition. 

There is an '' irrepressible conflict " in 

3^4 



Political Problems of Europe 

the development of German national life. 
Germany is endeavoring at the same mo- 
ment to be a great agricultural nation and 
a great industrial nation. Agriculture must 
wrest whatever it may of success from a 
stubborn, parsimonious soil; industry finds 
itself in a country barren of natural resources 
and lacking cheap raw material. 

It is only within a generation that Ger- 
many's industrial ambitions have become 
internationally important; but within that 
generation almost all of the vital currents 
of German development have been flowing 
in the direction of industrialism. Industry 
has gained on agriculture, until to-day the 
national economic life is about equally di- 
vided between the two. The great progress 
of industry has seemed to the agricultural 
half of the nation to work great hardship to 
it, while the present hopes and ambitions of 
the industrial half seem to the agrarians 
only to be the planning for them of still 
greater hardships. 

The landlord sees in manufacturing and 
commerce an unfair competitor for labor. 
The factory entices the laborer from his 
fields. Railroads and steamships, the land- 
lord thinks, are a malicious innovation, be- 
cause they bring the fields of Argentina and 
America into sharp competition with his 
own sterile acres. His only hope has been 

315 



Business and Education 

in keeping out of Germany the products of 
other agricultural countries and by gaining 
from the Government higher and higher 
protection for his own products. 

The landlord's antagonisms and com- 
plaints are by no means without foundation. 
He has certainly fallen on evil days. The 
march of events has made more and more 
difficult his financial position. While he has 
succeeded in la3ang enormous taxes on the 
foodstuffs of the German workingman, he 
has not freed himself from the difficulties of 
almost impossible competition. Every com- 
parison which he m.akes with his former 
position and influence adds to his bitterness 
against the new industrial regime. 

On the one side he finds himself pressed 
by what he regards as upstart socialistic 
doctrines and insistent demands for broader 
political rights, and even worse than that, 
the ever-reiterated demand for what seems 
to him ruinously cheap food. On the other 
hand, his long-established influence in af- 
fairs is assailed by a new aristocracy of 
wealth. When one remembers the historical 
position of the landed class, the landlord's 
view is not unnatural. All through German 
history the junkers have officered the army 
and led it to its fields of victory ; they have 
supplied the statesmen and furnished the 
class that has ruled the country. It is small 
316 



Political Problems of Europe 

wonder that they feel bitter antagonism 
toward this industrial development. This 
new industry has successfully competed with 
the meagre wage the landowner was able 
to offer to the farm hand. Bleak cottages 
are left empty, and fields are robbed of labor. 
The landlord's late servants, over whom he 
ruled almost as ruled his feudal ancestors, 
have not only left his acres, but in the cities 
they have organized themselves into a polit- 
ical power and shout '' bread usurer " at 
him, and in their determined demands for 
cheap food, keep up a constant warfare upon 
that protective tariff that is the only barrier 
the junker has left between his land and 
financial ruin. 

All that is bad enough; but when this 
same industrialism which has touched the 
aristocrat in his purse wounds him also in 
his pride, when it builds up a new aristoc- 
racy, a new ruling class with strength and 
position measured by wealth, and begins suc- 
cessfully to assail the junker's immemorial 
influence in national affairs, the bitterness 
of his position, with his traditions of for- 
tune and power thus being undermined, is 
not hard to understand. 

So Germany has, in the irreconcilable dif- 
ferences between agriculture and industry, 
an " irrepressible conflict " : On the one 
hand a landed aristocracy, long used to polit- 

317 



Business and Education 

ical power — a power whose roots run back 
to feudal tradition, but whose very daily life 
is now hampered and made difficult by 
depression in agriculture; while opposed to 
this aristocracy of birth is a flauntingly 
prosperous industrialism, with its rebellion 
against class, its demand for the curtailment 
of the privileges of the nobles, its appeal for 
broader political rights, and more secure 
individual liberty. The struggle which will 
go on between these irreconcilable elements 
of the German nation must have in it con- 
stant interest for us, and an interest that is 
not merely academic, for the progress of the 
conflict will have intimate relation to our 
position in international trade. 

When one gets even slightly below the 
surface in a study of political conditions in 
Germany, he cannot fail to be surprised that 
so little has been accomplished in the direc- 
tion of political equality and freedom. The 
junker's influence has its roots in centuries 
of prerogative. In a generation Germany 
has become a great power, political and 
economic, but in that time there has been 
no material internal advance in the direction 
of freedom. Constitutional Government is 
a semblance and a pretence, not a reality. 
The Reichstag at first had little enough influ- 
ence in shaping legislation, compelled as it 
was to work with a ministry in no wise re- 

31S 



Political Problems of Europe 

sponsible to it and dependent for its life only 
on royal favor; but instead of gaining for 
itself that decisive power which the popular 
house should have in a really representative 
government, its actual authority has sub- 
stantially diminished. It has relinquished 
much of its control over expenditures, and 
has also limited its power over income by 
agreeing to an arrangement for a rigid and 
intricate system of taxation which in its 
detail has no flexibility even to the wishes 
of the majority. 

Germany is governed by a bureaucracy, 
and in many ways better governed than any 
other nation in the world. Popular repre- 
sentation has little existence, and the voice 
of the people small influence. Without a 
doubt the German governmental organiza- 
tion is the best bureaucracy, the most scru- 
pulously honest, and, within its lights, the 
most painstaking and hard-working, that 
any government has trained to its aid; but 
the results are not popular government. The 
seeds of a desire for popular government 
were long ago sown in Germany. It is an 
expression of that desire, it is the political 
determination of the common people to write 
" truth " into the constitution, that gave the 
Social Democratic party in the last election 
three million votes — just under a third of 
the total. But the tremendous growth and 

319 



Business and Education 

the sweeping Adctories of that party are not 
to be taken as showing a disposition on the 
part of the German voter violently to over- 
throw existing conditions. They are critical 
of the growing expenditures of the Govern- 
ment, particularly for the navy, and they 
resent the injustice of the arrangement of 
the constituencies under which there is the 
greatest inequality of representation in the 
Reichstag. They are a party of protest 
against many existing conditions, but they 
do not threaten the permanency of Govern- 
ment ; and as they are sobered by increasing 
power and responsibility, their programme 
becomes in the main one which the average 
American voter would regard as an enunci- 
ation of fundamental principles of political 
equality and good government. 

The point of view of the Social Demo- 
crats is mainly economic. They believe that 
the present economic development — a de- 
velopment nowhere better illustrated than in 
Germany — makes necessary new political 
conditions. They see in that development 
influences leading inevitably to the greater 
and greater substitution of machinery for 
hand employment, to the stifling of small 
industries by great combinations. They 
believe that it has a tendency to place the 
means of production within the exclusive 
control of a comparatively small number 
320 



Political Problems of Europe 

of people, and they hold that this small group 
has monopolized more than its share of those 
advantages brought about by the increase 
in productive capacity. They are thus led 
to believe that this whole economic develop- 
ment makes necessary a revision of settled 
convictions both in regard to capital and the 
influence of the state on economic life. They 
hold in general that the authority of capital 
must be narrowed, while the limits and rights 
of the state to exercise control in economic 
affairs must be enlarged. So much for their 
strictly socialistic doctrines. They have 
come to be notably mild, and there has been 
eliminated so much of what was the old 
school of collective socialism that the 
party seems hardly entitled to the name of 
Socialist. 

The great wave of Socialism which has 
swept over Germany is really only a wave 
of liberalism ; the foundations of the Gov- 
ernment are in no wise shaken by it. Most 
of the demands which the triumphant Social- 
ist party make are of a character which will 
tend toward increased industrial efficiency 
should the Socialist go on toward even 
greater success. 

Germany, then, I believe, is a field which 
we should watch with the most intense in- 
terest for the evolution in political life which 
is sure to come, but that evolution has in it 
21 321 



Business and Education 

only promise of stronger and better gov- 
ernment, and no sign of anything that 
threatens the Government's permanence. 
There is much which we might wxll envy in 
the practical accomplishments of the German 
Government in the aid it gives to industry 
and the effect it has on commercial life; in 
the thoroughness and honesty of administra- 
tion, and in the substantial benefits received 
by every citizen. Whatever there is of evo- 
lutionary change in the future promises 
more, not less, efficient aid to industry. 
Whatever modifications are worked out in 
the national life — and there may be many 
— promise to result in giving Germany 
better government, and in furnishing a 
more secure foundation for the upbuilding 
of her industrial life, developing her as 
a competitor and strengthening her as a 
rival. 

Beyond all question America's greatest 
industrial competitor is Germany; the devel- 
opment in political life there promises no 
reactionary tendency in respect to industrial 
efficiency. Great as Germany is to-day as an 
industrial competitor, the coming years will 
make her greater. 

Although we may find in France and Ger- 
many a preponderance of reasons pointing 
to political stability, what of Austria-Hun- 
gary? Is the political life of the dual mon- 
322 



Political Problems of Europe 

archy near its end ? Is there to be dismem- 
berment, with all the endless consequences 
to European politics which a partitioning of 
the empire would engender? Any amount 
of support can be found for the most pessi- 
mistic views in regard to Austria's political 
future. Statesmen and journalists have not 
hesitated to write most frankly of their 
belief that great changes are impending 
there. Diplomats of experience may be 
found who hold the opinion that the funeral 
bells of Franz Joseph will ring down the 
curtain on the last act of the Hapsburg sway, 
and that will be true in spite of the age of 
the empire, the strength of tradition, and 
the convulsion which the whole political 
fabric of Europe will undergo. 

Certain it is that Austria-Hungary in its 
potentiality for political change is the most 
interesting country in Europe. The em- 
pire, with its peculiar duality of emperor and 
king, its two capitals, its triple ministry, its 
six chambers, its eighteen parliaments, and 
its dozen nationalities, offers a conglomera- 
tion of political ideas and ideals of racial 
antagonism and of parliamentary inconsist- 
encies which have strained to the utmost 
the diplomacy of the beloved monarch. 
Franz Joseph has in many ways ideally man- 
aged the difficulties of his position. With- 
out great strength, with his whole political 

323 



Business and Education 

creed a belief in compromise which should 
not give up the essentials of power, and in 
diplomacy which should play off one war- 
ring element against another, and leave the 
throne unharmed, he has found success beset 
by many difficulties. Had he not possessed 
a personality which has strongly attached to 
him the great majority of his turbulent sub- 
jects, it is hard to see how he could have 
succeeded at all. 

The average American hardly appreciates 
the political significance of the Empire of 
Austria-Hungary, nor the vast importance 
of the situation there to the future of Europe. 
Government there is more a display of 
hysterical sentiment than a political organi- 
zation for national, industrial, and commer- 
cial advancement. It is not easy for us, with 
our assimilative power of turning all nation- 
alities into Americans, to comprehend the 
intensities of the racial antagonisms of 
Europe. Nowhere do these antagonisms 
find freer play than in Austria-Hungary. 
The Poles and Bohemians retain memories 
of a past political greatness. The Magyars 
have as keen a pride of race as any living 
people. Every one of the dozen nationali- 
ties of the empire has racial ambitions of its 
own, an almost fanatical determination to 
exalt this language or that, and a total 
disregard for the general welfare in the 
324 



Political Problems of Europe 

struggle of many tongues and various racial 
ideals. 

It seems absolutely hopeless to expect that 
the Austria-Hungarian Empire will eventu- 
ally constitute itself into a confederacy after 
the German model — compact, homoge- 
neous, centralized. If one looks for such 
agreement as affording the only political 
bands that can permanently bind Austria 
together, it is easy to conclude that dissolu- 
tion, dismemberment, and partitioning must 
be written into her future, or to believe, as 
some do, that the future of the dual empire 
can be compassed in a sentence — that it is 
to be a new Balkan with a dozen little nations 
all at war, and in their racial prejudices that 
touch of fanaticism which will make them 
irreconcilable enemies. 

There are numberless reasons which can 
be brought forward pointing to the end of 
the Hapsburg reign; but unpromising and 
complicated as the situation is, there is one 
impressive reason stronger than all those 
that point to dissolution, one reason why the 
empire will go on even after Franz Joseph's 
death and the coming of a far less politic 
ruler : No European nation is anxious for 
Austria's territory. 

In spite of all the ambition with which 
Germany is credited, the weight of opinion 
in Germany is unfavorable to any extension 

325 



Business and Education 

of territory at Austria's expense. There are 
reasons enough apparent ^Yhy Hungary, with 
its racial prejudices, its own national ambi- 
tion, and the certainty of its forming a new 
Reichstag party, should not be brought into 
the empire. There are reasons almost as 
potent why the German provinces of Austria 
would not be welcome. It is true those 
provinces are thoroughly German in lan- 
guage, sentiment, thought, and aspiration. 
Their folk songs and poetry are full of long- 
ing for union with the Fatherland, but there 
is no sentiment among the influential people 
of Germany which would tend toward tak- 
ing these provinces into the empire, bringing, 
as they would, a great addition to the 
strength of the Clerical party, and laying on 
the Government responsibility and difficul- 
ties out of proportion to anything that would 
be gained. Russia has quite problem enough 
Avith her Poles, without wanting to reunite, 
by an absorption of Austrian territory, two 
parts of once partitioned and always un- 
happy Poland, and thus give new life to that 
national feeling which it has cost so much to 
subdue. The desire for a partitioning of 
Austria does not exist with the governments 
of the other great powers ; but violent as 
are the internal dissensions, most of these 
differences will be temporarily harmonized 
before the danger of any development that 
326 



J 



Political Problems of Europe 

looks like a recoloring of the map and an 
absorption into the stronger nationality of 
Teuton or Slav. 

A vast force is wasted in the Austrian 
Empire by racial antagonism and parlia- 
mentary strife. Industry and commerce are 
kept humbly waiting while parliamentary 
mobs shriek in a babel of uncomprehended 
tongues. The whole economic life and 
development is hampered, and there is little 
reason to hope for better things. But there 
is even less reason, I believe, to expect that 
the political bands which hold these warring 
elements into an empire will be broken, and 
that there will be liberated in the very centre 
of the European balance of power a dozen 
independent nationalities to make a convul- 
sion that would be as terrible perhaps as the 
events following the French Revolution. 

An ambassador at St. Petersburg, who 
had had experience in many European 
courts, once said to me : 

" I cannot put too strongly my belief in 
the solidity of the Government of Russia. 
Considering its vastness it is the most per- 
fect going machine in existence. I have 
known Russia many years, and I believe the 
Government grows stronger rather than less 
secure. The Government is in the awkward 
position of having to solve the double prob- 
lem of advancing and standing still. It 

327 



Business and Education 

desires to advance industrially and commer- 
cially, but it must stand still as an autocracy. 
For it to thus stand still there cannot be too 
much education. The strongest influences 
in the empire to-day are on the side of the 
Government, and those factors are always 
growing stronger. There will some day, of 
course, be political advancement; but any 
one who believes that the occasional plots 
and disturbances that get to the surface 
here point to any real danger to the founda- 
tions of Government has but a superficial 
knowledge." 

This view may not be generally agreed to 
in the light of developments in connection 
with the Japanese war. I know that there 
are observers of Russian conditions, whose 
opinion is well worthy of attention, who 
believe that Russia is on the point of a great 
political upheaval. The weakness of the 
Czar, the corruption of the bureaucracy, the 
inefficiency of government wdiich has at 
some points been disclosed by the events in 
the Far East, lead them to believe that a 
political awakening is near, that possibly the 
great territory to the east of Little Russia, 
which has been filled by adventurous exiles 
and progressive emigrants, will break off 
from the old autocracy and form an inde- 
pendent government. All that might hap- 
pen without greatly affecting political con- 
328 



Political Problems of Europe 

ditions in Russia itself. The day will un- 
doubtedly come when a constitution will be 
granted, but even that in itself will not 
greatly change conditions. Whoever has 
travelled in Russia away from the cities, 
observed the inertia of that vast population 
of peasants, noted the influence of the 
Church, and how it has been used as a 
branch of the civil service in the control of 
the population, will understand how slow 
must come any political changes which will 
really radically affect the national life. 

My own observation, which has covered 
a good deal of Russia, bears out most fully 
the expert opinion expressed above. There 
may be some slow evolution toward more 
popular political ideals, but the strength and 
solidity of the Russian Government is beyond 
our day to question. 

Such a survey of Europe, then, as a 
journeyman business man might take, can 
but lead, it seems to me, to the conclusion 
that on the whole European political condi- 
tions to-day point to solidity and security. 
There will be change, but the change will 
be development along right economic lines. 
There is no reason to suppose that the de- 
velopment of political events is to make 
Europe less strong and able as an industrial 
competitor. From an economic point of 
view the political outlook there can be re- 

329 



Business and Education 

garded with optimism. The development of 
poHtics and the evolution of government 
give promise of working toward greater 
economic efficiency, toward a more capable 
industrialism and an expanding commerce. 

11. France and the Clerical 
Problem 

In the United States the business of Gov- 
ernment is the government of business. 
Questions which come before Congress are 
nearly always related to business affairs. 
Once the running of the machinery of Gov- 
ernment has been provided for, and the great 
appropriation bills passed, the further sub- 
jects of congressional legislation are with 
rare exceptions directly concerned with 
commercial or industrial matters. Congress 
is a board of directors of a vast business 
corporation; its problems are business prob- 
lems; its main work, outside of the con- 
duct of the Government departments, is the 
fostering of business interests, on the one 
hand, and, on the other, the control of busi- 
ness organizations. 

There is not a member of either house of 
Congress who cannot with justice lay some 
claim to familiarity with business matters. 
The chief interests of all these members of 
Congress are business interests. The great 

330 



Political Problems of Europe 

legislative mainspring is the well-being of 
the nation's commercial and industrial life. 

In European politics, legislative condi- 
tions and questions are widely different from 
those in our own political life. The Ameri- 
can is at once struck by the peculiar fact 
that business men have small place in the 
parliaments there. Business questions are 
overshadowed by questions relating to class 
prerogative, racial domination and antag- 
onism, church authority, bureau patronage, 
hereditary power. Legislative programmes 
frequently turn upon points of sentiment 
— sentiment of race, of religion, of class, 
of political theory, or dynastic hope. 
Broadly speaking, there is no party on the 
Continent standing solely for a commercial 
idea. There is no party programme that 
solidly unites its followers for or against 
some commercial measure. The platform 
of parties, the issues on which elections turn, 
the proposals brought forward for legisla- 
tive consideration, have comparatively little 
concern with industry and commerce. 

The business man's first surprise is over 
the number of controversies in the political 
life of Europe having no bearing at all on 
business. He finds there many important 
public questions attracting the keenest in- 
terest of a whole nation, but having no re- 
lation to the financial income of voters. 



Busmess and Education 

The European business man does not take 
to politics, nor does he seem to be much 
wanted in the pohtical councils. There are 
three hundred members of the French Sen- 
ate, and only forty of these are in any way 
connected with commerce or industry. In 
the French Assembly the business man is 
almost a total stranger. In the Reichstag 
at Berlin business interests are better rep- 
resented, but in the parliamentary bodies at 
Vienna and Budapest, where sound commer- 
cial legislation is needed as much as any- 
where else in Europe, there is heard only 
endless wrangling of many races. The con- 
servative, sensible voice of the experienced 
business man is rarely heard effectively in 
\'ienna among those diverse tongues which 
will unite in no phrase unless it means legis- 
lative obstruction. 

The parliaments of Europe are far less 
representative of the people than is the case 
with us. Under the unfair system of ap- 
portionment in Germany and Austria a leg- 
islature representative of the people is out 
of the question. Emperor William's excur- 
sions into world politics Avould be rudely 
checked were his actions controlled by a 
Reichstag truly representative of the will 
of the majority of his subjects. In France 
the best elements of the population seem to 
view politics as they would a sinful occupa- 

332 



Political Problems of Europe 

tion. The French Chamber is made up 
of the most voluble and least valuable 
elements of the nation. It has been well 
said that France presents the spectacle of 
a tranquil nation with an agitated legisla- 
ture, and that in the Chamber, members 
freely apply such fitting epithets to one an- 
other as irresponsible, riotous, ill-mannered, 
and incoherent, while the great majority 
of the people whom these men represent 
are peaceful, thrifty, orderly, sober, and 
industrious. 

No single language could produce the 
wealth of epithets that abound among the 
hysterical Czechs, Croats, and the dozen 
other races in the Parliament of Vienna. 
Many of these distinguished statesmen re- 
gard as the most complete political success 
that action which will effectually block all 
legislation. Political villification in the 
Italian Chamber has been cultivated to such 
a fine art that none but the bravest or the 
brazenest of statesmen can there be induced 
to take office. 

When comparisons are made between 
America and Continental Europe, we can 
find much of which to be proud. Our 
growth, our wealth, our industries, our re- 
sources, our energy, all make flattering com- 
parison with average European conditions. 
But I believe, in making such comparisons, 

333 



Business and Education 

there is no one thing of which we have the 
right to be more proud than of the Congress 
of the United States. Better than any Con- 
tinental parhament, it represents the people. 
The one legislative body of the world that 
is in any way comparable to ours is the Par- 
liament of Great Britain. In character, in- 
tellect, methods, dignity, and in the truth- 
fulness with which each represents the 
people, the British Parliament and the 
United States Congress stand in a class quite 
apart and above any of the parliaments of 
Continental Europe. 

The parliamentary system has nowhere 
on the Continent developed along lines 
which produce the best results. The tem- 
perament of the Continental nations is not 
well adapted to party discipline. In a par- 
liamentary system working at its best there 
must be a party of the Government and a 
strongly united opposition — two parties 
with well-defined lines of demarcation. No- 
where on the Continent does that condition 
exist. Political inclination there tends to 
the formation of many groups rather than 
two parties. The lines separating these 
groups are usually far from clear. An 
American must be struck by the obvious 
fact that seldom is the main consideration 
which holds a group together a distinct 
commercial idea or programme. 

334 



Political Problems of Europe 

Germany in some ways is an exception. 
Nowhere else in the world can be found 
such sharp party discipline as in the Social 
Democratic party of Germany. Elsewhere, 
however, the political groups are but loosely 
bound together. The bonds are usually of 
a sentimental or racial character, or a fleet- 
ing attachment to some political leader. 
Plans for sound economic legislation looking 
toward the development of the industrial and 
commercial life of the nation seem not to 
offer sufficiently potent reasons anywhere 
in Europe for holding together a political 
party. In England, at the moment, there is 
a sensational exception. Mr. Chamberlain's 
fiscal policy, a purely commercial pro- 
gramme, has made a new and clean-cut line 
of cleavage in British politics and has 
brought about one of the most remarkable 
political situations which England has seen 
within the last fifty years. 

There is one type of problem to be found 
in almost every country in Europe from 
which happily we are in America altogether 
free. It has to do in one form or another 
with the relations between Church and State. 
It will be more clearly comprehended how 
great a blessing it is for us to be free from 
such controversies when something is un- 
derstood of the bitterness, the blind sacrifice 
of general good, and the countless obstacles 

335 



Business and Education 

in the way of political progress which these 
struggles engender. 

The most striking instance of such a 
problem, and one with a phase particularly 
unfamiliar to us, is the French clerical ques- 
tion. In every European country there is 
more or less state support of the Church, 
and that has everywhere resulted in the re- 
lations between the Church and State form- 
ing at times the subject of bitter controversy. 
Not only has the one absorbing political 
question in France for several years been 
the suppression of the religious orders, but 
in Italy the strained relations between the 
Vatican and Ouirinal form always an im- 
portant feature of the situation. In Italy 
the problem reaches down into the very roots 
of political life, and must for a long time 
have a profound effect on the national de- 
velopment, presenting as it does a contro- 
versy of the first importance at every elec- 
tion and at every session of Parliament. 

A majority of the most intelligent and 
best meaning voters of France believe that 
the life of the republic has been in peril. 
The general attitude of the Church, and 
particularly the character of the teaching 
of the religious orders, are the sources 
of this supposed danger. Nearly half of 
the youth of France have, even in recent 
years, received instruction in clerical schools. 

336 



Political Problems of Europe 

The belief is firmly fixed in the minds of 
more than half of the voters that this in- 
struction has tended to raise up enemies of 
France. 

The struggle against the powerful reli- 
gious orders is by no means a new one there. 
When the present Government came into 
office, with Waldeck-Rousseau as Premier, 
the particular mandate which it had from 
the voters was to curb the power of the 
religious orders, and especially to restrict 
their rights to teach. Curiously the law 
which Waldeck-Rousseau framed in 1901 
almost exactly duplicated one which had 
been passed a hundred and fifty years ago. 
The orders flourished in spite of a century 
and a half of restrictive legislation. When 
the present Government began its campaign 
of repression, there were 325,000 members 
of the orders. They held real estate valued 
at more than a billion francs, and one of the 
complaints against them that particularly 
appealed to the small landowner was that 
so vast a property had almost completely 
been withdrawn from productive usefulness. 
The personal wealth of the orders was so 
great it would be difficult to estimate it. Its 
extent is illustrated by the fact that when 
the prosecution became severe the sales of 
their French Government securities were 
great enough to be the main factor in a 

22 337 



Business and Education 

market decline that was regarded almost as 
a national calamity. 

A feature of the situation that has been 
particularly trying has been the unstinted 
use of this wealth in elections to secure the 
success of clerical candidates, or rather, to 
compass in any way possible the defeat of 
the Republicans. 

The relations between Church and State 
in France are defined by a concordat which 
stands to-day as Napoleon drew it. Catho- 
lics, Protestants, and Jews all receive allow- 
ances from the State, although the Catholic 
Church receives 41,000,000 francs of the 
43,000,000 of such church subsidies. 

The student of French institutions finds 
the living genius of Napoleon in many 
phases of government to-day. He seems 
less like a deposed ruler against whose sys- 
tem of politics nearly a century of effort 
has been directed than like a vigorous sov- 
ereign absent from France on a brief vaca- 
tion. The influence of Napoleon, in the 
stamp he left on French institutions, seems 
after the vicissitude of succeeding monarchy, 
empire, and republic, and the passing of 
nearly a century greater than that of any 
living man. And so this concordat, which 
he drew in 1801, and which has passed un- 
changed through succeeding forms of gov- 
ernment, has remained to become the chief 

2>Z^ 



Political Problems of Europe 

problem of French politics more than a cen- 
tury after it was signed. The concordat re- 
established the legal existence of the Cath- 
olic Church, which had been annulled by the 
Revolution. The ecclesiastical property con- 
fiscated by the Republican Government was 
not restored, and the Pope and his succes- 
sors were bound not to move to disturb the 
purchasers of such property. Provision was 
made for state support of bishops and clergy 
in lieu of their appropriated property. The 
Government was given the right to nominate 
bishops. The Church, therefore, has nat- 
urally and inevitably been deeply interested 
and constantly an important factor in French 
politics. When the present republic came 
into being, a republic without republicanism, 
as it was called on the assembling of the 
first Chamber, the Republicans would have 
been in a hopeless minority had it not been 
for the discord between Royalists and Bona- 
partists. The Clerical party was distinctly 
anti-republican, and by its political activity 
and bitterness that party well earned Gam- 
betta's denunciation as an enemy of the re- 
public. His " Le clericalisme, voila I'en- 
nemi " has for thirty years been a political 
war-cry. 

Those who stand for the Republic have 
come naturally to count the Clericals as the 
enemies of the State. The Clericals have 

339 



Business and Education 

left no lack of reason that this should be 
so. However vigorously the Republicans 
might fight the Clericals at the polls or de- 
nounce them in the Chamber they felt al- 
ways the quicksand in the ground on which 
the enemies of clericalism were standing, 
because the next generation of voters were 
growing up in the clerical schools and re- 
ceiving instruction which, even though it 
hardly warranted the charge of being directly 
seditious and threatening to the life of the 
State, was certainly not designed to make 
these youths Republicans. 

This state of affairs resulted in a plat- 
form which was larger than any single party, 
a so-called Programme of Republican De- 
fence, on which there has been room not 
only for Republicans to stand, but breadth 
enough for Radicals and Socialists as w^ell. 
It has furnished the basis for the coalition 
of parties which forms the present Govern- 
ment and has made the common ground on 
which these groups, holding in some re- 
spects most divers political faiths, could be 
united into what is known as the Republican 
" Bloc." 

The first change in the law as made by 
Waldeck-Rousseau in 1901 only went so 
far as to compel the orders to obtain au- 
thorization from the Government for their 
legal continuation. After Waldeck-Rous- 

340 



Political Problems of Europe 

seau gave way to Combes, the Government 
went at the subject in the most thorough- 
going manner, its aim being so effectually 
to disband the orders that there should be 
no possibility of their return to instil into 
the minds of the French youth doubts and 
questions as to the republic. 

The struggle is one of the sort in which 
there can be drawn no straight line of right 
and wrong. It is undoubtedly true that the 
traditional attitude of the Church and of 
the Clerical party has been reactionary and 
generally unfriendly to the republic, that 
the character of the teaching by the orders 
has been open to most reasonable and vig- 
orous objection by those who hold firm faith 
in the principles of republicanism. It is true 
that the Church has been active in public 
affairs, perhaps fairly earning the charge 
that clericalism is a movement " that tres- 
passes, in the name of the Christian faith, 
on the domain of politics, and that, under 
the cover of religion, menaces the tran- 
quillity of the state." There has been 
ground for objection to the growth of the 
wealth of the monastic orders, especially 
when they were directly engaged in com- 
mercial affairs. Particularly has there been 
room for objection when they used their 
wealth to influence elections. The more 
rapid advance of those army officers who 

341 



Business and Education 

were educated in the clerical schools, com- 
pared with those who received their edu- 
cation elsewhere, has been an annoying evi- 
dence of the solidarity of clerical influence. 
There have been bigotry and narrowness, 
overzealousness and defiance of law, priestly 
exhortation better fitted to the stump than 
the pulpit, and even counselling toward re- 
sistance and defiance of law that was well 
fitted to neither. 

It must be remembered, however, that 
there has existed a great and respectable 
minority holding the most sincere belief in 
the unwisdom of this restrictive legislation. 
The programme of the Government has 
struck at the deepest sensibilities of this mi- 
nority. There has seemed to be undue haste 
and needless harshness. The subject touched 
many interests and appealed to many senti- 
ments and prejudices. It had taken the Re- 
publican party thirty years to bring itself 
to put its fears into legislative enactments, 
and it could have well afforded to have used 
greater tact and less haste in enforcing the 
laws it passed. It has met intolerance with 
intolerance. It has come dangerously near 
violating fundamental rights and liberties 
in its struggle to subdue the orders which it 
declared were the particular enemies of those 
very rights and liberties. It has outraged 
the sentiments of a most important minority 
342 



Political Problems of Europe 

and has earned by its methods some of the 
epithets it has hurled so vigorously at its 
adversaries. Still it must be remembered 
that the Republicans have had to engage in 
this struggle against a most powerful antag- 
onist, one with wealth, organization, time- 
established position, and with the great ad- 
vantage of religious bulwarks behind which 
to fight. It has been war; and war in pol- 
itics, as between armies, is not the place to 
look for fine ethical distinctions. 

The avowed aim of the Combes ministry 
to create a " lay " state so far as the schools 
are concerned, to give to the state a complete 
monopoly of education, is now a practi- 
cally accomplished fact. But in setting up 
in the businesses of education, as in setting 
up in other businesses, there are attendant 
expenses. The Government has at once 
been placed under the necessity of greatly 
extending the national school system. Thou- 
sands of new schools must be provided. 
The expenditure of sixty million francs is 
at once required for building new school- 
houses. Then there is an added annual 
charge of many million francs on national 
and local budgets to provide for the salaries 
of the great corps of teachers. Not only 
were the teaching orders affected, but the 
nursing orders were suppressed too. Nearly 
all the hospitals had been economically man- 

343 



Business and Education 

aged by the nuns; the nuns were replaced 
by lay workers, and the increased expendi- 
tures on that account have been great. 

The French budget is one which has 
tested the keenest ingenuity of each suc- 
ceeding Finance Minister to reach a satis- 
factory balance, and all these increased ex- 
penditures are bringing forward practical 
questions of revenue and taxation which are 
not always relished by even the most zealous 
supporters of the policy of suppression. 

The point in all this that seems specially 
interesting to Americans is the nature of the 
controversy and the happy absence in our 
own political system of the elements that 
would make such a controversy possible. 
Here we see the political forces of a great 
nation absorbed for years in a struggle so 
bitter as to provoke scenes of the most vio- 
lent disorder in the Chamber ; and in the 
communes riots, active resistance to law, 
military suppression, and bloodshed. We 
observe a struggle in which are brought into 
fiercest play not only the ordinary political 
passions, but one in which bigotry, pious 
prejudice, and exasperated religious sensi- 
bilities are met by political intolerance. We 
see arbitrary power justifying in the name 
of liberty the invasion of fundamental 
rights. We note an enactment of harsh 
and unjust laws which their sponsors be- 

344 



Political Problems of Europe 

lieve necessary to preserve the life of the 
repubhc. 

Can we not, in the face of all that, listen 
with some complacency to the imputation 
that we are a nation of dollar worshippers 
and that we concern ourselves with no ques- 
tions of politics that do not affect our 
pocket-books ? 

In spite of all the political energy that has 
for several years gone into the discussion of 
the French schools, it has not, unfortunately, 
led directly toward any effort to improve 
the existing school system. No party has 
given serious consideration to a plan insur- 
ing better educational preparation for the 
French youth. No party has made the de- 
velopment of a system of technical schools 
or the introduction of commercial training 
an important part of its programme. 

The political life of the French nation has 
for several years centred exclusively about 
the school system, but there has been no 
awakening there to the need of advanced 
methods nor to the advantage of new 
courses such as have been adopted with ad- 
mirable results in Germany. That was of 
course, impossible, considering the nature 
of the controversy. It will be hardly pos- 
sible for some years to come. The national 
school system must now be organized and 
developed^ and for a long time there will be 

345 



Business ajid Education 

work enough to do to get it in smooth run- 
ning order, leaving Httle room to expect 
radical improvement in methods or extension 
of scope. A\'hat has been going on in France 
is a fundamental struggle between the 
Church and State. Ultimately education 
will probably be benefited, but those on each 
side of the controversy have had only in 
mind the question as to which should con- 
trol the educational system. 

The eventual denunciation of the concordat 
is one of the certainties of French politics. 

There are reasons, however, why the 
movement may now pause. There are other 
pressing questions, and the forces back of 
them are in a measure interlocked with 
those which have dominated the anti-clerical 
struggle — especially is that true of the de- 
mand of the Socialists. The consideration of 
that subject must be left to a later paper, 
as must also the aspect of the Socialist move- 
ment in other countries beside France. 

III. The Progress of Socialism 
Socialism is a live political factor in Eu- 
rope. There is a wave of socialism flowing 
over the whole Continent, reaching heights 
of much importance in Germany, Belgium, 
and France, and giving a distinct trend to 
political life in Austria and Italy. 

It is of great importance to us because of 
346 



Folitical Problems of Europe 

the vital effect which the success of the social- 
ist parties would have on European institu- 
tions and upon the social and industrial con- 
ditions there. Of even wider importance, 
however, is this great political and social 
movement, because it foreshadows a ten- 
dency which we are likely to see gain great 
force in our own country. It seems to me 
not improbable that we shall, in the next 
few years, hear much of socialism in our own 
political life. I do not think it will be sur- 
prising if we eventually find political forces 
here drawn up on a new alignment, with a 
party standing on a platform which might 
be made up from principles taken from the 
programmes of socialist parties of Europe, 
and opposed to those who will stand for 
conservatism and the permanence of present 
institutions and conditions. 

What a socialist party they would make! 
The discontented would find promise in such 
a platform. The believers in the power of 
legislation to work miracles in bringing 
prosperity and bettering social conditions 
would find plans for legislative experiments 
which would interest them. Those who see 
danger in aggregated wealth, the opponents 
of trusts and combinations, the populists, 
would all find such a party congenial. The 
advocates of Federal control of railways and 
telegraphs, and those who think the Gov- 

347 



Business and Education 

ernment should get deeper into finance and 
organize postal savings-banks, would find 
planks which met their views. One of the 
main tenets of faith would of course be the 
belief in universal old-age pensions and in 
insurance to compensate for loss of health 
or employment, with the taxes for creating 
such funds laid on the incomes of the 
wealthy. Such a plank would have wide 
popularity, and those who are dissatisfied 
and who are in favor of any change or of 
any new legislative experiment would be 
attracted. We certainly have just the sort 
of material here in plenty for the building 
of a socialist party along lines which are 
showing such vital force in the political life 
of Europe. And as in Europe, there would 
be much good in the programme, and much 
error, many fallacies for the demagogue to 
rant over, much that would be utterly im- 
practicable, but m.uch that would appeal to 
those whose lot is less favorable than they 
believe it should be. 

There are no influences more likely to 
bring change to Europe than are those vari- 
ous political currents which are combined 
under the rather loose term socialism. I 
believe there are beginning to be seen in our 
own political life many similar currents. It 
is natural that those currents will eventually 
come together into a united political party. 
348 



Political Problems of Europe 

Such a party might be called " Socialist," 
or it might find some other name, but it 
would be a party with many of the same 
principles as those of the socialist parties of 
Europe. 

If we are facing socialism here, some 
study of the progress of socialism in Europe 
is well worth our while. 

In France, the clerical question absorb- 
ing the main energies of all parties for sev- 
eral years, as it has, is second only in polit- 
ical importance to the problems which the 
growth of socialism has there brought into 
prominence. The position of the Social- 
ists in influencing public affairs is much 
strengthened by the fact that they have been 
essential allies of the Republicans in their 
struggle with the Church. As has been in- 
dicated in a former paper,^ the Socialists 
have presented a solid front with the Repub- 
licans in the whole programme of Republican 
defence, and now that a decisive defeat has 
been dealt the Clerical party, the Socialists 
are demanding support in turn from the Re- 
publicans. The position of the Republicans 
makes the support of the Socialists necessary 
to them, and it is logical to expect that the 
Government programme will in greater and 
greater degree recognize Socialist demands. 

The French Premier, M. Combes, has re- 

1 Page 340. 
349 



Business and Education 

cently stated the main objects of the present 
French ministry, and the programme as he 
outhned it shows the influence of the So- 
ciaHsts. He has stated that in addition to 
the continuance of repressive measures 
against rehgious orders, the ministry pro- 
poses to pass laws on the subject of work- 
ingmen's pensions, adopt a comprehensive 
plan for the assistance of invalids and old 
people, reform the tax system, and reduce 
to two years the time of military service. 
This programme indicates how important 
the Premier recognizes it to be that the 
Socialists continue their support of the Gov- 
ernment. As the Socialists and Socialist 
Radicals have 140 members in the Chamber 
of Deputies, compared with 240 Republi- 
cans, it can be readily seen what important 
pillars of the Government support they 
form. The Socialist group, composed, as it 
is, almost exclusively of the working class, 
naturally has ambitions that are by no 
means confined to the programme of Repub- 
lican defence. They want legislation which 
in their opinion will have an important bear- 
ing on the whole social order. 

Like Socialists everywhere, they demand 
much that is utterly impractical. The 
Government has accepted a few of their 
most workable theories. If the platform of 
the revolutionary Socialists was carried out 

350 



Political Problems of Europe 

there would be a complete upsetting of the 
Government, for they favor the suppression 
of the Senate and the President of the re- 
public. The programme of the less extreme, 
and more truly representative, group of 
Socialists calls for laws restricting the hours 
of labor and affecting conditions of employ- 
ment. They desire to transplant the German 
system of sick funds and old-age pensions, 
and lay the burden of their maintenance 
upon the State. This great charge upon the 
budget they are ready to provide without 
hardship to themselves by the imposition 
of a graduated income tax on the wealthy. 
Complete freedom in forming associations 
is desired, laws more favorable to labor 
unions are wanted, payment to the holders 
of elective offices advocated, and the control 
by the state of the railroads, mines, and 
banks is also proposed. The Socialists are 
almost as much opposed to state education 
as they have been to clerical instruction. 

The Socialists' contention that the rich 
are getting richer and the poor are getting 
poorer was pretty effectually disproved re- 
cently by the investigation of the French 
Labor Bureau covering labor conditions in 
France from 1840 to the end of the century. 
During a period in which the population 
grew only 12 per cent, the consumption of 
wheat rose 60 per cent, of meat 90 per cent, 

351 



Business and Education 

potatoes 100 per cent, sugar 500 per cent, 
and alcohol 260 per cent. 

The demands of the Socialists seem likely 
now to come into the foreground. It is 
probable that we shall see in France much 
parliamentary attention given to legislation 
having for its object the amelioration of 
the condition of the working people. That 
fact is by no means without significance in 
a survey of commercial conditions in France. 
The questions that promise to take a lead- 
ing position in legislative consideration will 
involve material change in the relations of 
the working classes to their employers, and 
may threaten marked alteration of the ratio 
in which profits are divided between capital 
and labor. Considering the strength and 
vitality of French socialism, the future 
would seem to favor legislation of a char- 
acter likely to affect unfavorably industrial 
enterprise, at least until a process of read- 
justment has been gone through. French 
commerce is therefore facing unpleasant 
legislative possibilities in the way of income 
taxes, old-age pensions, restrictions of the 
hours of work, and legislation favoring labor 
organizations. 

The adoption of a scheme for old-age 
pensions and the imposition of an income 
tax are now earnestly favored by the min- 
istry. The Finance Alinister, I\I. Rouvier, 
352 



Political Problems of Europe 

who has proved himself one of the most 
adroit and able men who ever held the 
Treasury portfolio, has formulated a scheme 
of taxation which would abolish the pres- 
ent somewhat intricate system, and replace 
it with two simple revenues — one a tax on 
income, and the other a tax on house rent. 
The Socialists condemn the Government 
scheme, declaring it not progressive enough. 
They demand a tax which shall almost 
entirely consume property when income 
reaches a high level. 

The respect for property rights is gener- 
ally so highly developed in France that it 
hardly seems probable that the Socialists, 
strong and growing though the party is, 
will be able to pass legislation of so radical 
a nature as they now propose. Should they 
make substantial progress with their income- 
tax scheme, French business interests will 
have more reason to concern themselves with 
politics in the next few years than has been 
the case for a long time past. 

The Socialist party in France has none of 
the remarkable coherence which the Social 
Democrats of Germany exhibit. The most 
striking feature of the German Social-Dem- 
ocratic organization is its perfect unity. 
The individual subordinates his ideas to the 
main programme. The will of the party, as 
expressed by the majority, is absolute law. 

23 353 



Business and Education 

The party discipline is the most perfect to 
be found in any poHtical organization. The 
French SociaHsts, on the other hand, are 
constantly at variance. They frequently 
break up into warring groups. At present 
there are two groups of importance, and 
five or six subordinate ones. If there was 
prospect of the strength of the Revolutionary 
Socialists increasing until they were able 
to impress their views upon the Chamber, 
the outlook for French commerce and in- 
dustry would be serious indeed. 

The Revolutionary Socialists want no 
half-way business about their old-age pen- 
sion system. They desire that the pension 
shall be large enough to insure the aged 
workingman living in comfort, and they do 
not want it to be put off until he has grown 
weary waiting for it. Not only do they want 
large pensions to begin before extreme old 
age is reached, but they are radically op- 
posed to any contributions from the v/ages 
of the working people to replenish the pen- 
sion fund. They want it all provided by 
the State. They would have the wealthy 
pay the pensions instead of making frugality 
a requisite, as in Germany. 

The French Socialists show a tendency, 
however, to abandon the revolutionary ideas 
which have marked the programmes of their 
more radical groups. With the adoption of 

354 



Political Problems of Europe 

a sober and more practical programme they 
show growing strength. In national politics 
they have reached the dignity of representa- 
tion in the Cabinet, as well as substantial 
power in the Chamber. 

The chief practical success which French 
socialism has gained thus far, however, has 
been the acquisition of municipal power. 
Many of the larger cities of France are now 
controlled by Socialist councils. Before 
1892 the Socialists had a majority in only 
one town council — in Saint Ouen — but 
since then they have succeeded in securing 
majorities in ten other important town 
councils, including such cities as Lille, Mar- 
seilles, and Calais. The municipal council 
of Paris has a Socialist group so important 
as strongly to influence its actions. In those 
towns where the Socialists have a majority 
they frequently pass radical measures for 
the benefit of the laboring classes, but those 
measures are always vetoed by the prefects, 
who have an absolute veto power. The pre- 
fects pronounce such legislation as outside 
the council's jurisdiction. In that way the 
power of the Socialists in municipal affairs 
is sharply limited. No matter how radical 
may be the voice of the municipal council, 
the action of that body is held in check by 
the centralized system of government which 
Napoleon planned. The municipal council 

355 



Business and Education 

may have a majority of members with ever 
so revolutionary plans. The council is pre- 
sided over by a prefect who represents the 
central Government, and wields a veto which 
will effectually check a tendency toward any- 
thing which the officials in Paris may re- 
gard as dangerous enactments. 

In Belgium socialism is one of the strong- 
est of the present political forces. It is 
natural to find in that country a fertile field 
in which to spread socialistic doctrines, for 
it is a country with a great industrial popu- 
lation and a comparatively small number 
who devote themselves to agriculture. The 
greatest energy is shown there in the sys- 
tematic inculcation of socialistic ideas. Not 
only is there thorough organization in the 
cities, but the proselyting is pushed out into 
the agricultural districts. On Sundays in 
Belgium it is a common thing to see squads 
of bicycle riders passing along the country 
roads distributing socialistic literature to the 
peasants or waiting outside the doors of 
the little country churches to hand out their 
socialist tracts. 

In the cities the strength of the socialists 
became so great that the railroad adminis- 
tration, which is in the hands of the Gov- 
ernment, thought to help the industrial em- 
ployers and increase the supply of workmen 
by organizing a series of workingmen's 

356 



Political Problems of Europe 

trains. Greatly reduced fares were put in 
force on these trains, and they transported 
to the cities and to the industrial centres 
great numbers of workingmen who lived 
in the country and who had not yet taken 
up socialist ideas. The Government's ex- 
pectation of making headway against the 
workingmen's combinations has not been 
realized. It has turned out that the new 
laborers thus brought to the cities have 
quickly taken up the doctrines and ideas of 
the dwellers in the towns, and the recent 
progress of the Socialist party has been 
mainly made among the inhabitants of those 
small villages. Among the peasants, those 
who are actually workers in the fields, little 
headway is made by the propaganda of the 
workingmen's party. 

Socialism in Belgium has developed 
largely in the direction of co-operative en- 
terprises. In that particular it has taken a 
firmer hold in that country than elsewhere. 
Co-operative evolution is already too far ad- 
vanced for any opposition by the State to be 
effective. There are many huge co-operative 
organizations, and their energies are directed 
toward almost every phase of economic life. 
In the main they may be said to be success- 
ful ; certainly they are far more successful 
than any attempts at co-operation which we 
have seen in America. Without doubt their 

357 



Business and Education 

influence is beneficent. Most of the great 
co-operative associations have their own h- 
braries, devoted particularly to economic and 
social science. In the Vooruit, at Ghent, I 
have seen a collection of many thousand 
volumes devoted to these two subjects. 

There are nearly two thousand co-opera- 
tive societies in Belgium, with a million con- 
sumers. Fully one-seventh of the total pop- 
ulation belong to these institutions. They 
are flourishing institutions, too, showing 
good management and important economic 
results. The Maison du Peuple, in Brussels, 
is one of the most important of these co-oper- 
ative organizations. It is a sort of people's 
palace; it contains libraries, concert halls, 
theatre, and lecture-rooms, as well as the 
co-operative stores for furnishing every kind 
and variety of supplies. There are attached 
to the institution doctors, dentists, and ocu- 
lists. It covers practically every department 
of life, and is more comprehensive than the 
greatest of our own department stores. 
Some of these institutions administer life- 
insurance funds and sick benefits with 
success. 

All the members of the workmen's party 
are members of some co-operative organiza- 
tion, so that the co-operative and the polit- 
ical movements have gone hand in hand. 
In the small villages the first co-operative 

358 



Political Problems of Europe 

establishment is generally a bakery, and this 
becomes the nucleus of a large co-operative 
industrial company later. There is success- 
ful co-operation, too, in the purely agricul- 
tural communities, in the form of associa- 
tions for buying supplies and for selling the 
produce of the farms. The farmers believe 
that a central control over the marketing of 
their products has greatly increased their 
income. It has tended to eliminate unnec- 
essary competition and to better adapt the 
supply to the demand. 

The Socialist party in Belgium now has 
over five hundred thousand votes, and, con- 
sidering its relations to the co-operative es- 
tablishments, probably controls a larger 
amount of capital than any other political 
party. Its struggle and agitation for univer- 
sal suffrage has been its most important 
undertaking. Dangerous weapons were 
used. I can imagine few graver prospects 
than the possibility of the introduction of 
similar methods of warfare into our politi- 
cal life. As a climax in the effort to obtain 
universal suffrage, there was an attempt 
made to bring about a universal strike in 
every industry, with the hope that there 
would be such complete paralysis of the na- 
tion's industrial life that the Government 
would be compelled to yield. The attempt 
was a failure, but the method was a most 

359 



Business and Education 

dangerous precedent. The strike will be 
remembered as probably the greatest one on 
record. More than 300,000 workingmen 
were idle. Nearly every industry in the 
country, with the exception of the railroads, 
post-offices, and telegraph lines, was affected. 
The strike was marked by comparatively 
little disorder. In spite of the imposing 
manifestation on the part of the people, the 
Government succeeded in maintaining its 
majority, and the Chamber, by a majority 
of 20, refused to consider the cjuestion of 
revising the constitution in favor of univer- 
sal suffrage. The election which followed 
strengthened slightly the workingmen's 
party, but also strengthened the Clericals, 
who are at present the controlling force back 
of the ministry. The Chamber is made up 
of 166 members. The Clericals now have 
96, the Socialists 35, and the Liberals 34. 

The union of political and labor organi- 
zations is seen in the highest development 
in Belgium, and the result of that union, 
with its possibility of strictly class legisla- 
tion, may well be to us an interesting field of 
observation. As yet it has not seriously 
affected industry, nor threatened existing 
forms of government, but if the great indus- 
trial population of Belgium is eventually 
united into a political organization of suffi- 
cient strength to take the control of the 
360 



Political Problems of Europe 

Government out of the hands of the Cler- 
icals, Belgium is likely to become the scene 
of extremely interesting socialistic legisla- 
tion. 

A phase of socialism which is especially 
emphasized in Belgium is the attitude of 
the party toward art, and the plans for pro- 
viding culture and amusement for the peo- 
ple, in answer to a demand for public en- 
tertainments and for great spectacles. In 
a state in which they hope to abolish the 
Church and the army, they propose to have 
something to substitute for churchly pomp 
and military pageant. They expect to do 
this by parades and celebrations of one kind 
and another, and even now they work out 
the details of these in a most artistic and 
thorough way, modelling them largely on 
the magnificent festivals of the Belgium 
cities in the Middle Ages. A harvest festi- 
val which I recently saw in Bruges was an 
elaborate and artistic example. A proces- 
sion with floats representing different grains 
and different phases of the harvest certainly 
made in the way of public amusement a 
good substitute for a spectacle on the 
Champs de Mars. 

The Belgian Socialists ask of the Govern- 
ment that so far as possible it cultivate the 
artistic in all phases of public life, and that 
the strength of the State be directed to ob- 
361 



Business and Education 

literate all ugly and unpleasant sights. Of 
the Minister of Finance is demanded money 
of more artistic appearance, modelled closely 
on the lines of antique coins. From the 
Minister of Railroads they wish stations of 
architectural excellence, decorated by the 
greatest of contemporary artists, and rail- 
way carriages where comfort is combined 
with the consideration of what is beautiful. 
They even ask for less commonplace rail- 
road tickets. From the Minister of Agri- 
culture are demanded comprehensive plans 
for the preservation of the trees along the 
great national roads ; and from the Minister 
of Industry, the reorganization, improve- 
ment, and vitalizing of the provincial schools 
for teaching industrial art, the creation of 
museums and galleries, and generally the 
provision of the means for higher artistic 
culture. 

Thus the Belgium Socialists by no means 
propose to confine their ambitions to the im- 
provement of material conditions. In some 
respects they may have impractical ideals, 
but on the whole their programme is one 
which must inevitably work toward the up- 
lifting and better living of the dense indus- 
trial population. Undoubtedly they scatter 
and weaken their force by the breadth of 
their demands. Their programme, how- 
ever, is interesting, both from the fact that 
362 



Political Problems of Europe 

it illustrates the nature of what we would 
regard as fundamental political rights for 
which they are still struggling, and illumi- 
nates some of the high ideals with which the 
party is imbued. 

In politics they desire universal suffrage, 
decentralization of the legislative power, 
communal autonomy, the right of initiative 
and referendum, educational reform, the 
suppression of the Church and army, civil 
equality of the sexes and suppression of 
hereditary functions, and finally the estab- 
lishment of a republic. In economic mat- 
ters they have a great programme of public 
charity in the shape of general insurance 
for all citizens. They favor the abolition 
of all laws against coalition. They de- 
sire free agricultural education, insurance 
against the diseases of plants and animals, 
and against the damages of storms and 
floods, the suppression of the hunting pre- 
serves, and the establishment of the right 
to destroy during every season animals which 
do harm to the crops. 

In the Belgium elections all the influence 
of the priests and of the owners of land is 
exercised against the Socialists. The cred- 
ulity of the country folk leads them to accept 
from priests some remarkable interpreta- 
tions of socialistic aims, and a common con- 
servatism in the country results in advanced 

3^3 



Business and Education 

ideas taking root very slowly. The work- 
ingmen's party in Belgium strongly favors 
woman's suffrage. The organization of 
Belgium women into unions of political 
societies has not, however, made much 
progress. 

In Austria, where the conditions of suf- 
frage are unfavorable to Socialists, they 
have returned only ii members to the 
Reichsrat. Although the party shows a 
total strength of nearly 1,000.000 votes, the 
class system of A^oting gives it small repre- 
sentation. The recognized party organiza- 
tion has expelled the extreme revolutionists, 
and has taken up the interests of the peas- 
antry. As a natural sequence the party has 
become anti-Semitic, as the Jews are the 
great landowners of the country. It has 
been said that two Jews own a quarter of 
the agricultural land of Hungary, a state- 
ment which is hardty within the facts. The 
Rothschilds are said to own one-third of the 
farming land of Bohemia, which is perhaps 
another exaggeration. But in any event such 
accumulation of enormous tracts of land has 
led the Socialist party to take a strong anti- 
Semitic position. The agrarian interests are 
naturally violently opposed to the Socialist 
doctrines. They haA'e secured legislation 
authorizing employers to dismiss without 
wages any workingman suspected of being 

364 



Political Problems of Europe 

a Socialist agitator, and are not above seek- 
ing any unfair advantage in combating what 
they regard as a national danger. 

Socialism is an unimportant element in 
the politics of Holland, although so far as it 
does manifest itself it is revolutionary in 
character. In recent municipal elections the 
Socialists met with losses. They have prac- 
tically no influence in national politics there. 

In Sweden there is only one Socialist 
member of Parliament, and in Switzerland 
there is also one. Although socialism has 
shown no vitality in the Scandinavian 
countries, there has been a gTeat develop- 
ment of co-operative enterprise there. This 
is true particularly of Denmark's dairy in- 
terests. The first of the Danish co-opera- 
tive dairies was started about a score of 
years ago. They have been so well managed 
and produced such satisfactory results, that 
four-fifths of the dairy interests of the 
country are now handled by co-operative 
organizations, and the exports of Danish 
butter have grown in value from $5,000,000 
to more than $30,000,000. Co-operative 
organization has been extended with great 
success to other agricultural interests. There 
are co-operative meat-packing concerns with 
65,000 members that have shown good re- 
sults. Success has also attended the hand- 
ling of poultry and other farm produce. The 

365 



Business and Education 

great development of Denmark's export 
trade in agricultural produce and the ex- 
ceptional favor and high prices those prod- 
ucts command in the English markets are 
held to be in large measure an indication of 
the advantages of co-operation. 

Italian Socialists show considerable po- 
litical vitality, and the revolutionary phase 
is emphasized there. The party demands 
universal suffrage for adults of both sexes; 
greater freedom of organization, of public 
meetings, and of combination; religious 
equality; a national militia in place of the 
standing army; neutrality of the govern- 
ment in disputes between capital and labor; 
a more humane penal code; the nationali- 
zation of railroads and mines ; effective com- 
pulsory education; old-age pensions; the 
establishment of a ministry of labor, and 
the payment of deputies and members of 
local councils. The Italian Socialists have 
shown a pretty steady growth in the last 
decade. Their programme in the main is 
such that ordinarily progressive govern- 
ment and a fair measure of political rights 
would satisfy most of the demands of the 
party. 

In England there are but two Socialist 
members of Parliament, and one of them, 
John Burns, is hardly considered a Social- 
ist by the members of the party. In spite 
366 



Political Problems of Europe 

of that there is to be found in England an 
impressive manifestation of sociahstic tend- 
encies. Its development is in connection 
with the municipal ownership of public 
utilities. What is called *' gas and water 
socialism " has generally been the begin- 
ning of these municipal enterprises. There 
are some successes and a great many fail- 
ures. In England human nature is not 
greatly different from human nature as 
found elsewhere, and municipal counsellors 
are, as a usual thing, demonstrated to be 
none too well fitted for the conduct of the 
huge industrial enterprises which many of 
the municipalities have undertaken. There 
has been an astonishing increase in muni- 
cipal indebtedness following in the wake of 
these industrial undertakings. The mu- 
nicipal expenditures for industrial under- 
takings have resulted in the raising of the 
tax rate to such a point as to cause a whole- 
sale exodus of tax-payers from some muni- 
cipal districts. 

The labor vote in England frequently 
unites solidly in favor of its candidates for 
municipal office, and sometimes with curi- 
ous results. Two labor leaders were re- 
cently elected to the town council of Bat- 
tersea, for example, and shortly after their 
election, having used their political influ- 
ence to secure jobs as street-sweepers at 27 

367 



Business and Education 

shillings a week, they resigned their politi- 
cal office. 

More or less important as is the Socialist 
movement in those countries already re- 
ferred to, it is in Germany that we find it 
developed to a commanding political posi- 
tion. It is, perhaps, hardly fair to call 
the Social-Democratic party of Germany 
as it now exists strictly a party of Social- 
ists, for there are many members of it who 
elsewhere would be known as Liberals. It 
is true the platform of the Social-Demo- 
cratic party was originally the communistic 
manifestos of Carl Marx and Frederick 
Engels, and at first the party held that the 
emancipation of labor demanded the trans- 
fer of raw material to the common posses- 
sion of society, and that only the best 
results and the just distribution of the 
products of labor could be obtained by the 
communistic regulation of collective labor. 
Thirty years ago, under the direction of 
Liebknecht and Bebel, the party united to 
itself the labor unions and organizations of 
various sorts, and became a party of polit- 
ical importance. The growth of the Social 
Democrats in Germany has been coincident 
with the growth of industrialism. It is the 
party of labor and of protest. Its most 
A^iolent opponents are the agrarians, whose 
lands have been stripped of cheap laborers 
368 



Political Problems of Europe 

by the development of industrialism in the 
cities. The party has thrived under perse- 
cution. It steadily gained votes in the face 
of the most antagonistic laws which the Jun- 
kers could devise with Bismarck's aid, and 
the most harassing police espionage which 
the bureaucratic system of Government has 
made possible. 

In the last German election nearly one- 
third of the 9,500,000 votes were polled for 
the Social-Democratic candidates. The re- 
sult of that election shows a loss of nearly 
30 per cent by the agrarian groups, and a 
gain of 43 per cent by the Social Demo- 
crats. It was the sort of thing that we call, 
in our politics, a landslide. Every session 
of the Reichstag for eighteen years, how- 
ever, has shown an increasing number of 
seats occupied by the Social Democrats, so 
that the great gains of the last election did 
not indicate a turning over of public senti- 
ment. It rather represented a culmination 
of those influences which have been adding 
strength to the Social-Democratic party 
ever since the first session of the Reichstag 
in 1 87 1, when only one Social Democrat 
sat on the extreme left. 

The Social Democrats now poll a ma- 
jority of votes in nearly every capital city, 
every great mercantile marine port, and in 
all the great industrial centres. They are 
24 369 



Business and Education 

handicapped by unfair representation. If 
the true expression of the wiU of the Ger- 
man people were reflected in the Reichstag 
the Social Democrats would be in a com- 
manding position there. 

In studying German politics, however, it 
must be borne in mind that the ministry is 
not responsible to the Reichstag, but only to 
the Emperor. Xo cabinet resignations or 
dissolution of Parliament follows a vote un- 
faA^orable to the Government. The Reich- 
stag has little more than a veto power, 
and the people are hampered in the expres- 
sion of CA'en that veto privilege by the 
greatest inequalities in the electoral divi- 
sions of the empire. The election law 
originally provided that there should be 
one member of the Reichstag for, generally 
speaking, every 100,000 inhabitants, but 
did not provide for fair readjustment in 
case of increasing or shifting population. 
Since that law was passed, the populaton 
has increased from 40,000,000 to 58,000,- 
000, but there has been no rearrangement of 
electoral divisions. There is one member of 
the Reichstag who represents 183,076 votes, 
and another who represents only 9,551. 

The increase in population has been in the 
cities, and it is from the cities that the Social 
Democrats draw their main strength. The 
unfairness and inequality of the present 

370 



Political Problems of Europe 

electoral arrangement, therefore, falls with 
greatest force upon the Social Democrats, 
and reacts to the greatest advantage of the 
agrarians and Clericals. Those groups, 
forming, as they do, the Government ma- 
jority, and being the beneficiaries of the 
present inequalities in the electoral distribu- 
tion, are unwilling to concede the slightest 
change. They dread the ascendancy of the 
Social Democrats as some great national 
calamity, and they offer their fears as their 
excuse for manifest unfairness. 

Although the Social Democrats polled 
3,010,000 votes, or 32 per cent of the total, 
they have only 81 seats in the Reichstag, 
which is composed of 397 members. The 
Centre, with a popular vote of 1,850,000, 
has 100 seats in the Reichstag. If there 
had been fair representation and an equal 
distribution of political rights the Social 
Democrats would have 125 members and 
would have been the strongest group in the 
Chamber. Berlin has 6 members of the 
Reichstag, but on a fair plan of distribution 
would have 20. 

The unfairness of the electoral distribu- 
tion in the empire is even more marked in 
some of the states of which the empire is 
formed. In the Prussian Diet there is, for 
example, not only the same inequalities in 
the size of the constituencies, but there is a 

371 



Business and Education 

unique plutocratic system of A^oting by class 
according to the amount of taxes paid. The 
city of Berlin now has 9 members in the 
Diet, but would liaA'C, on an equitable basis 
of population, 25. The system of voting by 
classes is peculiar, and must strike those of 
us who love political equality as most un- 
fortunate. The system is this : In each elec- 
tion precinct the voters are divided into 
three equal classes, on a basis of the amount 
of taxes paid. These electors form a little 
electoral college, choosing the member or 
members of the Diet. Here is a specific il- 
lustration of how this system works out : 
In a certain district of Berlin, which in- 
cludes a part of the Wilhelmstrasse. the first 
class has in it 3 voters, the second class 8, 
and the third class 294. The ballots of the 
three voters in the first class thus have the 
same political weight as the ballots of the 
294 in the third class, because the first class 
pays the same amount of taxes as the third 
class. But the particularly amusing feature 
here is that this third class of 294 includes 
Count von Biilow and other Cabinet mini- 
sters, and many high Government officials. 

Under this system there is not only in- 
equality of political rights wathin a district, 
based on the tax contribution of the voter, 
but it results in most absurd inequality in 
the political rights of one district as against 

372 



Political Problems of Europe 

another. In some districts of Berlin, for 
instance, a man must pay 150,000 marks in 
taxes in order to vote in the first class; in 
other districts a payment of taxes to the 
amount of 36 marks puts the voter into the 
first class. Bismarck called the Prussian 
method " the most miserable of all electoral 
systems," but the Government shows no 
growing disposition to change it. Herr von 
Hammerstein recently said, " No other elec- 
toral system gives such a correct impression 
of public opinion as our tripartite system in 
Prussia." 

What is it that caused such remarkable 
growth of the Social-Democratic party? 
What are the complaints of the German 
people? What measures do the Social 
Democrats purpose? Does this party of 
protest and discontent, growing as it has the 
most rapidly of any political party in Eu- 
rope, foreshadow changes which will have a 
momentous effect on industrial conditions? 
Those are all questions, the answers to 
which seem to me of direct interest to us. 

The point of view of the Social Demo- 
crats, without doubt, rests in large measure 
on a sound appreciation of economic facts. 
They have seen at close range the effect of 
modern economic development. They have 
noted the substitution of machinery for hand 
labor and the stifling of small industries by 

373 



Business and Education 

great and more efficient industrial combina- 
tions. They offer no plan to oppose such 
development. They recognize that it is in 
the line of economic evolution. But they 
are convinced that it has deprived, and will 
continue to deprive in an increasing degree, 
the individual worker of the means of inde- 
pendent production. The result, they be- 
lieve, is the creation of a new social order, 
and there must in time be a readjustment of 
economic conditions to meet the change. 
There is no disposition violently to over- 
throw existing conditions. 

A natural deduction from the growth of 
the Social-Democratic party might be that 
such growth indicates a tendency toward 
revolution, and that with increasing power 
and confidence it may become a movement 
to overthrow the Government. Probably 
nothing could be further from the future 
course of events. 

The principles for which the Social Demo- 
crats stand are the sort that naturally thrive 
in the German character. The German is 
supercritical. He delights in national fault- 
finding. He takes naturally and kindly to 
a party of opposition. He is devoted to 
speculative philosophy, and the dreams of 
the classical socialist writers appeal to him. 
His phrenological bump of the ideal is 
highly developed, and political ideals that 

374 



Political Problems of Europe 

would in other countries be regarded as im- 
practical dreams are in Germany the sort of 
thing around which a party can be built, and 
a party, too, which will submit to the most 
rigid and practical party discipline — the 
sort of discipline that every German has 
learned to know the value of in his army 
training. 

Not alone is the German character the sort 
which would encourage the growth of so- 
cialism, but German political conditions, 
which were inherent in the varied political 
development of those countries which were 
forged together into the German Empire, 
have been such as must inevitably have 
united into a party of opposition men who 
had ideals of true liberty. The German 
states were securely bound together when 
the empire was agreed to, but they were not 
amalgamated. They remained states whose 
political development covered the whole 
range from actual feudalism to those re- 
publican cities with well-developed consti- 
tutional government. Even in dominating 
Prussia constitutionalism was only skin 
deep; the real government was junkerism 
and militarism. The Junkers are slow to 
give up their traditions of feudal authority. 
Their deep-seated conviction to-day is that 
they should rule by authority not by ma- 
jority. There is many a Junker aristocrat 

375 



Business and Education 

who believes as devoutly in his divine right 
to stand in a position of authority toward 
his humbler, though perhaps wealthier fel- 
low citizens, as does the Emperor himself. 

Few nations have had a more trying task 
than Germany has had in disentangling the 
confused political rights as found in the gov- 
ernmental institutions of the various states, 
in reducing to proper proportions the dual 
powers of state diets and Imperial Reichs- 
tag. Popular representation at first had 
little meaning. Part of the work which the 
Socialists set out to do was to develop it. 
Tangible form was to be given to those con- 
stitutional provisions defining the rights of 
the people, and a party with something more 
than Junker agrarianism or clerical conserv- 
atism in its programme was needed. The 
Social Democrats took that as their work. 
The development of true liberty demanded 
the abolishing of caste and the undermining 
of class privileges. Nothing could be more 
to the taste of those men who directed the 
Socialist movement. The Socialists believe 
that the political task which they have to 
accomplish is the development of a living 
constitution and the impression of modern 
ideas of freedom on Government and 
Reichstag. 

They have grown to be a party with over 
three million votes, but they feel they have 

376 



Political Problems of Europe 

as yet accomplished small part of their work. 
They have seen the empire become a great 
political and commercial power, but there 
has been little progress toward individual 
freedom and equality. They declare that 
constitutional government, as found in Ger- 
many, is a semblance and a pretence, not a 
reality, and they are largely right. The 
Reichstag is not truly representative, and if 
it were it would still be without authority. 
The Emperor, the army, the aristocrats, the 
bureaucracy, and the police govern Ger- 
many. The vote of a citizen has less direct 
influence than in any other country with a 
constitutional government. 

The power of the police is especially ob- 
noxious to the German Socialists. It is 
true that the police do interfere in about 
every relation of life, and while from one 
point of view the result is the most orderly 
government in the world, there is ample 
ground for irritation at the nature of the 
espionage. Nowhere else, not even in Rus- 
sia, do the police so completely constitute 
themselves the guardians of the public. 
There is complaint, too, against the tend- 
ency to give the widest possible interpreta- 
tion to the penal code, to make every con- 
ceivable action liable to punishment, to re- 
strict the freedom of meetings, of public 
speech, and of the press, and to invoke the 

377 



Business and Education 

laws of lese-majesty in a way that is re- 
garded as barbarous and intolerable. 

So much for the general grounds upon 
which may stand a party of protest. There 
is one specific grievance, however, which 
has had more influence in building up the 
Social-Democratic party than almost all 
other factors together. The question of 
dear food or cheap food makes an issue 
that is easily comprehended. The natural 
political enemies of the Socialists, the Junk- 
ers, want nothing in politics more than high 
protective duties on agricultural produce, 
for that is all there is between the agrarians 
and ruinous competition with the fields of 
America. The industrial population, of 
course, wants cheap food, and so the issue 
is clearly drawn. Their war-cry is the 
epithet of ^' bread usurer." Their argu- 
ments, from the industrial point of view 
alone, are unanswerable. Germany has the 
dearest meats and dearest wheat of any 
country in the world. Converts are plenti- 
ful when a campaign is made to centre about 
the easily understood phrase of cheap food. 

It is natural to find the Socialists opposed 
to the great expenditures on army and navy. 
They are not so much opposed to the army 
as to the vast sums which the Kaiser pours 
into the building of a navy. They know 
that the navy is built from customs dues. 

378 



I 



Political Problems of Europe 

They know that the taxes on cereals and 
coffee provide ahnost half of the customs 
receipts, and they feel that the Government 
unjustly taxes the necessities of life in such 
a way that the poor contribute to the de- 
fence of the country practically as much 
per man as do the well-to-do and the rich. 
The new tariff, raising the duty on wheat 
and rye from 33 to 55 marks, has not 
softened their bitterness. If this new cus- 
toms law comes fully into force, they be- 
lieve they will lose as much in that single 
blow as they gained by the passing of all 
the old-age pension laws which they secured 
after years of struggle. The Socialists' 
complaint against the army is not directed 
toward military service, but against the 
system under which the army is officered 
only by aristocrats, and remains the least 
democratic of all German institutions, al- 
though every German gives part of his life 
to it. 

Here is the programme of the German 
Socialists as formulated by the more moder- 
ate members of the party. They pronounce 
for the maintenance of constitutional guar- 
antees, and would give real form and sub- 
stance to the constitutional rights of the 
individual. They aim at the establishment 
of a sound financial system, with a view to 
free and unfettered economical development 
379 



Business and Education 

and the free interchange of commodities be- 
tween nations. They desire the maintenance 
of peace, a just system of parhamentary 
representation and responsibihty of the 
^Ministers to the Reichstag, a fair division 
of the burdens of taxation by means of a 
progressive income tax. the making of 
proper commercial treaties, the administra- 
tion of justice in criminal courts in a more 
humane spirit, reduction in the period of 
military service, and the limitation of mili- 
tary expenditure. All this does not seem 
very revolutionary in character, nor likely 
to result in serious harm to the German 
nation. 

The Social Democracy has been wonder- 
fully fortunate in the devotion and pure 
motives of its leaders. One sometimes hears 
the influence of August Bebel likened to 
that of the Pope in the extent to which he 
requires and wins the fidelity and obedience 
of radical elements noted in other countries 
for diversity of views and for restlessness 
under restraint. This great man ought not 
to be judged alone by his utterances in pub- 
lic speeches. He has an oratorical passion 
that sometimes goes far beyond his generally 
cool judgment and moderate views. Herr 
Bebel even in the opinion of the court is, I 
believe, first a lover of Germany, and second 
an implacable enemy of privilege and hum- 
380 



Political Problems of Europe 

hug. He has a vast talent for organization 
and for the selection and phrasing of issues. 
The millions of the poor behind him believe, 
and doubtless, justly, that his courage and 
discriminating devotion to them is without 
bounds. 

One thing especially stands out in regard 
to the German Socialist party, and that is 
its absolute unity. The discipline of the 
party is magnificent. A most striking ex- 
ample of this was the way in which Bern- 
stein accepted the vote directed against him 
by the majority of the general Congress of 
Liibeck, and declared himself to be willing 
to follow, under all circumstances, the wishes 
of the majority of the party. Shortly after 
this, Bernstein was chosen by the Socialists 
as their candidate for election from a certain 
district to the Reichstag, whereupon the en- 
tire party in that district, including some of 
those who' had been most violently opposed 
to him in the Congress, voted loyally for 
him and secured his election. 

There have only been two cases in twenty- 
seven years where there has been such a 
split in the Socialist party of any district 
that they have put up two candidates for 
the same election. 

The decisions of the general congress of 
the party are final, but the delegates have 
been careful to limit these decisions chiefly 

381 



Business and Education 

to matters of principle. Local organiza- 
tions in the different states have a great 
deal of freedom in regard to deciding their 
own questions. 

During the last seven or eight years the 
co-operative movement and the movement 
for the formation of workmen's syndicates 
have grown rapidly in Germany, and have 
made great headway among the Socialists 
themselves. It is the same active working 
class that composes the Socialist party, the 
Syndicates, and the Workmen's Co-operative 
Societies, and these organizations will be of 
the greatest help to the Socialists in their 
future conflicts. 

Although the Social Democrats form the 
party of the workingmen, they do not select 
workingmen as their representatives in the 
Reichstag. More than half of the repre- 
sentatives of that party are editors, and prac- 
tically none are actually industrial workers. 

There is a phase of human nature which 
one encounters in Germany which has a 
marked influence upon political development 
there. It is " unfashionable " to be out of 
accord with the Government policy. In Eng- 
land a man may be a " Free Trader " or a 
" Protectionist," a " Little Englander " or a 
dreamer of imperialistic dreams, without 
affecting his social status one way or an- 
other. In France the whole business of 
382 



1 



Political Problems of Europe 

politics is rather outside the highest social 
life and society concerns itself little with the 
shades of a man's political opinion. But in 
Germany all that is different. It is distinctly 
unfashionable, in the view of the best so- 
ciety, to hold opinions antagonistic to the 
Government, and the weight of that fact is 
tremendous in the shaping of men's opin- 
ions. The young man of good family who 
finds that with the adoption of radical politi- 
cal ideas he meets with distinct coolness in 
the homes of his friends, that his name is 
dropped from dinner lists, and his social 
acquaintances regard him with disfavor, 
needs a great deal of courage to pursue that 
line of thought. The power of social opin- 
ion, as represented in aristocratic society, is 
perhaps nowhere more potent in political 
matters than in Berlin. 

The tremendous increase in the vote of 
the Social Democrats in Germany, while it 
has failed to give to that party anything like 
a proportionate representaton in the Reichs- 
tag, has nevertheless had marked influence 
on legislative action. On the part of all the 
other parties there appears to be a whole- 
some fear of the increasing power of the 
Socialists, and they are ready to adopt, not 
only any unfair means that they may devise 
to compass the Socialists' defeat, but they are 
quite ready to make concessions and attempt 

3^3 



Business and Education 

to placate the dissatisfied workman. No 
other country has gone so far as Germany in 
legislating- in the interests of the working 
class. The system of old-age pensions is the 
most notable example of such legislation. 
By Bismarck's own admission, the measure 
was designed to take the wind out of the 
sails of socialism. It was believed that the 
interest which every workman would be 
given in the Government through a prospec- 
tive pension would furnish the motive for 
securing the support of the working classes 
for the Government side. The ill success of 
the scheme from that standpoint is apparent. 
Nevertheless, the direst foes of socialism, 
after the great victory of the Social Demo- 
crats in the last election, called for further 
labor reform legislation as an antidote 
against the spirit of socialism. 

In the Reichstag there has been a flood of 
enactments for the benefit of the laboring 
classes, and the consideration of sugges- 
tions along this line has occupied much of 
the time of members. Labor legislation 
has been popular with all parties. With the 
Socialists, naturally, because it was labor 
legislation which they particularly de- 
manded, and with the other parties because 
they thought by championing the cause of 
labor they could overcome the disaffection 
of workingmen in their ranks. In the 
384 



Political Problems of Europe 

recent budget debates, an astonishing 
amount of time was given to petty questions 
regarding the wages of workmen in certain 
Government shops, their hours of work, and 
the regulations controHing their employ- 
ment. 

There is every reason to believe that legis- 
lation favoring the working classes will con- 
tinue to be enacted by the Reichstag. Soon 
after the opening of the last session. Count 
von Biilow announced that the Government 
hoped eventually to bring forward a scheme 
of insurance for widows and orphans, at the 
public expense, and it was also intimated 
that some plan for insuring workingmen 
against non-employment was under con- 
sideration as a probability within the next 
ten years. Thus, the State, as an antidote 
to socialism, adopts measure after measure 
of a distinctly socialistic character. 

An idea of the activity in turning out 
social reform laws can be gained by enumer- 
ating some of the recent legislation of this 
kind. In 1899 ^^^^ system of old-age pen- 
sions was revised and extended, and the 
rate of pension payments was increased ; 
then the law on accident insurance was 
amended and improved. In 1902 a law 
defining the rights of seamen was thor- 
oughly overhauled and brought into har- 
mony with the spirit of modern labor reform 
25 385 



Business and Education 

views in Germany. A revision of the sick- 
insurance law was made last year. Laws 
regulating the relations between tradesmen 
and their employees have been passed, mak- 
ing specific provisions regarding the hours 
of closing, number of hours for work, and 
daily intermission for meals. A resolution 
has been passed asking for a bill similarly to 
protect the employees of lawyers, notaries, 
and bailiffs. There have also been many 
laws passed regulating the hours of employ- 
ment in all manner of industries. 

The German Government is pleased to 
busy itself in passing many laws for the ben- 
efit of the working population, but it never 
fails to assume the position of having con- 
ferred favors rather than of having granted 
rights that intrinsically belonged to the class 
which the legislation concerns. In such leg- 
islation the Government always assumes the 
position of the giver of benefits to inferior 
beings. All this is apparent from the atti- 
tude of the different ministers toward the 
lower Government officials and employees, 
who are domineered over in an astonishing 
way. The right of organization by minor 
Government employees is severely frowned 
upon, and the harshest means are used to 
prevent it. If the political footsteps of the 
Government employee stray into the path 
of Social Democracy, they are quick to en- 
386 



Political Problems of Europe 

counter serious obstacles. Count von Biilow 
has enunciated the principle that no Govern- 
ment employee can be a Socialist and every 
under official adopts that view. 

The Government looks with scant favor 
on any sort of labor organization and stead- 
fastly refuses to enact a law to permit labor 
unions to affiliate with each other in joint 
associations. That has long been one of the 
points of Socialist demand, and it is a per- 
mission strongly desired by the working 
classes generally. Last year a great con- 
gress of union socialistic workmen was held 
at Frankfort-on-the-Main. That congress 
represented 600,000 members, and it de- 
clared the solidarity of those members with 
the Socialists in respect to the demand for 
permission to affiliate the labor unions. Va- 
rious resolutions have been passed in the 
Reichstag in favor of this extension of lib- 
erty to the workmen, but these resolutions 
have availed nothing. A delegation from 
the Frankfort congress presented their views 
in a petition to Count von Biilow, who 
promised to " take it into benevolent con- 
sideration." 

There is a class of politicians in Ger- 
many, members of the two conservative 
parties and the National Labor party, who 
are called in the political jargon of the day 
the " Scharfmacher." They are men who 

387 



Business and Education 

want sharp, repressive measures against 
labor agitators, strikers, and particularly 
against Socialists. They are the stalwarts, 
the men of firm hand and implicit belief 
in relentless governmental authority. The 
'' Scharfmacher " defend the excessively vig- 
orous discipline in the army, and they ap- 
prove of the action of the courts in their 
frequent punishment of lese-majesty. 

The Socialist movement is thus seen to 
be a live political force in Germany, Bel- 
gium, France, Italy, and Austria, while in 
England, although it holds no position in 
national politics, it has accomplished more 
in the direction of municipal activities than 
has been done elsewhere. The general 
tendency is toward moderation. The revo- 
lutionary Socialists are everywhere in the 
minority in their party, and the tendency is 
further to reduce their influence. In general, 
the whole Socialist movement is becoming 
more opportunist, there is a growing dis- 
position to be more practical, to endeavor 
to obtain such concessions as they can, and 
not hold out too strongly for the adoption 
of an entire programme and a general over- 
turning of the present social order. The 
theoretical and academic socialism is giving 
way in some measure to a socialism which 
takes note of practical politics. 

Beyond all question, many of the things 

3^^ 



Political Problems of Europe 

which the SociaHsts are striving for are 
economically sound, ethically just, and po- 
litically desirable. They are fighting class 
privilege and the traditions of caste; they 
are struggling for a fairer franchise and 
more truly representative government. They 
are everywhere the party which upholds the 
rights of the weak, and more earnestly 
than any other party they seek to secure 
to every citizen political equality and indi- 
vidual liberty. 

With such objects and aims, there is no 
wonder that the movement grows. But all 
that is not socialism; it is only liberalism 
at its best. Unfortunately, the Socialist par- 
ties are not made up altogether of moderate 
and fair liberals. While it is true that some 
of their demands will, when secured, mean 
that Europe has taken steps toward distinctly 
better government, those moderate and sen- 
sible measures form only part of their pro- 
grammes. Other phases of their demands 
represent the spirit of unrest, of dissatisfac- 
tion with existing conditions, of class envy, 
of faith in those fallacies which lead men to 
believe that they can substitute legislation for 
thrift and industry, that a comfortable old 
age is a right to be demanded wholly from 
the State and without any contribution of 
economy and present sacrifice from the 
individual. 

389 



Business and Education 

The whole Sociahst movement is largely 
a class movement; it draws a line between 
property and poverty, and is constantly 
running the danger of listening to dema- 
gogue leaders who appeal to envy and pas- 
sion, and under a guise of justice and equal- 
ity propose measures that are unjust and 
inequitable. It is antagonistic to religion, 
not only contesting the power of the Church 
but openly avowing atheistic views. The 
movement has in it the promise of good 
and the danger of evil. The good is pretty 
certain to be accomplished, for in the end 
it will appeal to the fair-minded of all par- 
ties; the evil may be great or small in pro- 
portion to the fairness of the Socialists' op- 
ponents. All European government is cer- 
tain to make ultimate progress toward an 
equality of rights for all citizens. If the 
conservatives, the agrarians, and the cler- 
icals raise in the way of that progress ob- 
stacles which will not give way, they may 
call into play some of the high explosives 
that are to be found in the programmes of 
the revolutionary branches of the Socialist 
parties. On the whole, however, I doubt if 
the Socialist movement is likely to do much 
permanent political harm to Europe, while 
it already has done and w^ill continue to do 
considerable good. 

It has seemed worth while going some- 

39° 



Political Problems of Europe 

what fully into the Socialist movement, be- 
cause the Socialist parties of Europe present 
about the only political tendencies toward 
change which there are there. They are 
opposed by parties of reaction or parties 
anxious to maintain the status quo. The 
success of the Socialist parties will in the 
main, for the present at least, mean the suc- 
cess of liberalism. Such success will not be 
likely to affect greatly commercial relations 
between Europe and America. Success in 
some of their endeavors will undoubtedly 
tend to raise the cost of production in Eu- 
rope, but such tendency would probably be 
counteracted by the greater industrial effi- 
ciency which improved social conditions 
would bring. 

One of the most striking differences be- 
tween Europe and America is the persist- 
ence of racial type there and here the tend- 
ency tO' amalgamate all races into the 
American. Time seems to bring only in- 
creased bitterness to racial antagonisms in 
Europe, while with us the third generation, 
at the outside, is completely merged into 
the American type. I never have been able 
to understand just what it is that keeps the 
rancor of races at such a virulent pitch 
among near neighbors in Europe', when 
those same races will here renounce lan- 
guage, flag, and racial aspirations, and joy- 

391 



Business and Education 

fully and completely merge into the Ameri- 
can — all patriotic, all loyal to the Govern- 
ment, all in a generation more anxious to 
cover every trace of foreign characteristics 
with the mantle of sovereign American citi- 
zenship than they are to perpetuate a single 
one of those racial prejudices which for gen- 
erations made enemies of their fathers. 

In the case of races that are living side 
by side, that are occupied with the same 
general problems of life, and that would 
enjoy the same measure of benefit or endure 
the same degree of hardship as legislation is 
economically good or bad, one would sup- 
pose that time Avould soften the asperities 
of racial dislikes. In Europe it is not so. 
There are some nine races in Austria, for 
example, and the most beneficent piece of 
legislation that could be devised for the ben- 
efit of the whole country would be coldly 
received compared with the delight with 
which eight of these races might for a mo- 
ment unite to bring discomfort to the ninth. 
They never unite for the common good — 
it is only that they may at the moment feel 
a common hatred for some third race strong 
enough to bring them together in an attempt 
to harass the common enemy. 

The economic importance of these racial 
antagonisms is enormous. With our homo- 
geneous population it is hard for us to un- 

d9^ 



Political Problems of Europe 

derstand what a drag and a block an effi- 
cient government must follow when senti- 
ment instead of sense must be appealed to 
in the legislative chambers. The govern- 
ment machinery of Hungary was practi- 
cally paralyzed for a year because there was 
a deadlock over the question whether the 
army should march to the command of 
'' Vorwarts, marsch ! " or " Elore, indulj ! " 
whether the word of command should be in 
the Magyar tongue or in the German. 

The language question in itself is of enor- 
mous importance, and there seems no tend- 
ency toward it becoming less so. The most 
earnest efforts are made to continue separate 
schools for all the varied tongues that con- 
fuse and make difficult the life of Europe. 
The persistence of each type of language is 
in itself of great economic moment, for it 
is a most difficult barrier against that free 
commercial intercourse — intercourse where 
there is mutual understanding and confidence 
— which does so much to permit the rapid 
expansion of trade. A Europe with one 
language and without the barrier of internal 
tariff walls, a Europe which offered such a 
field for the free and natural expansion of 
commerce as does the United States, would 
be a Europe whose economic force was so 
increased that no one could say how vast the 
gain would be. 

393 



Business and Education 

The struggle between the two races in 
Bohemia — that is, between the Czechs and 
the Germans — is probably the most acute 
and typical example of the racial difficulties 
throughout Austria. There are in Bohemia 
9,300,000 inhabitants, who are divided into 
5,800,000 Czechs, 3,300,000 Germans, and 
200,000 Poles. According to the budget of 
1 90 1, German Bohemia pays 250,542,000 
crowns for taxes to the State; that is, 66 
per cent of the total for Bohemia; but the 
State expends only 32,992,000 crowns in the 
German districts, while it expends 104,945,- 
000 crowns in the Czech part of the country, 
which pays only 128,494,000 crowns of 
taxes. The figures are so juggled, both by 
the Germans and the Czechs, that it is almost 
impossible to get a fair estimate of the real 
number of each in the country, of the amount 
they pay in taxes, or of what they receive. 

The Czechs say that the language struggle 
in Bohemia was provoked by the Germans, 
who placed over their shops and restaurants 
inscriptions such as " Forbidden to talk 
Czech " or " Entrance is Forbidden to Beg- 
gars, Dogs, and Czechs " ; whereas the Ger- 
mans say that although Prague is the capital 
of a bilingual country, the town councils do 
not allow German names to be used in the 
streets ; and an amusing feature of the strug- 
gle is that the Slav Congress held in 1898 at 

394 



Political Problems of Europe 

Prague was obliged to use German as the 
official language of debate, as it was the 
only tongue which all the delegates under- 
stood. 

Throughout Austria the struggle between 
Czechs and Germans is particularly keen 
over the schools. Two rival school associ- 
ations, one German and the other Czech, use 
every means in their power, the one to Ger- 
manize the Czech children, and the other to 
teach them the cult of the Czech language 
and nationality. 

Austria-Hungary and the Balkan coun- 
tries we recognize as the home of racial an- 
tagonisms. Such a great percentage of the 
political life there is absorbed in these con- 
troversies that commercial and social inter- 
ests have but scant recognition. But we are 
not so apt to remember that in Germany one 
of the fundamental problems of government, 
and one of the most perplexing and impor- 
tant, has tO' dO' with the discontent of the 
fragments of the nationalities which are still 
unreconciled to the Imperial Government. 
These are the people of Alsace-Lorraine, the 
Danes of North Schleswig, the Hanoverians, 
and the Poles. In the conquered French 
provinces there has been some real head- 
way in breaking down the old antipathies, 
but nowhere else is there much progress. 
The discontent along the Danish border is 

395 



Business and Education 

gaining in importance, thriving on the un- 
wise pohcy of the Prussian Government in 
guarding too zealously against all petty 
demonstrations of Danish sympathy. The 
Government acted with great harshness a 
few years ago in expelling Danish house 
servants, farm laborers, and other humble 
folk because they sang Danish songs, and in 
other simple Avays proclaimed their Danish 
sentiments, and only recently the ^linister 
of the Interior has implied threats that such 
expulsions may be resumed. The Hanove- 
rians have never been reconciled to the union 
of the old kingdom of Hanover with Prus- 
sia, and the Guelph party still elects half a 
dozen members of the Reichstag. In the 
last session of the Diet, Herr von Hammer- 
stein, the Prussian Minister of the Interior, 
declared that the Guelphs, next to the So- 
cialists, were the element most dangerous to 
the existence of the State. 

All these racial discontents are nothing, 
however, compared with the race problem 
in the Polish provinces. In the province of 
Posen. some parts of East Prussia, and in 
the mining districts of Selesia, the Govern- 
ment meets one of the most serious of all 
its difficulties, and one that seems to become 
more serious with time. The Poles have 
lately been growing more radical, and in- 
stead of working in political harmony with 



Political Problems of Europe 

the Clerical party, as they once did, they 
have drawn political lines strictly in ac- 
cordance with their racial aims, and have 
even put candidates in the field against their 
old allies, the Clericals, and that with occa- 
sional success. Even the Polish Socialists, 
unlike the Socialists elsewhere in Germany, 
show a strong disposition to pursue paths 
of their own, rather than act with the Social- 
Democratic organization. 

The pacification of the Poles has called 
forth enormous effort from the Prussian 
Government, and astonishing expenditures, 
but all, apparently, to little purpose. The 
scheme in which the Prussian Government 
puts greatest faith, and for which it has made 
unstinted appropriations, has been the pur- 
chase of large estates in the Polish prov- 
inces for the purpose of dividing them into 
small holdings and settling Germans upon 
them, with the hope of thus Germanizing 
the country. Bismarck started the policy 
in 1866 with a fund of 100,000,000 marks; 
in 1898 that was increased to 200,000,000 
marks, and in 1902, the appropriation being 
nearly exhausted, a further vote of 150,000,- 
000 marks was made, with an additional 
grant of 100,000,000 marks for the purpose 
of acquiring Polish estates to be turned into 
state domains and forests. There has thus 
been an authorized expenditure of $112,- 

397 



Business and Education 

000,000, with results that leave the popula- 
tion to-day as antagonistic to the Govern- 
ment as it was when Bismarck conceived the 
scheme. 

The Poles are by no means poor, and 
they met this policy of '' pacification by 
Reichsmarks " with a private organization. 
A great Landbank, provided with ample 
capital, has been established with the pur- 
pose of undoing the work of the Govern- 
ment. The Landbank buys land from the 
thrifty German settlers and returns the na- 
tive Poles to till it. The Settlement Com- 
mission, which has charge of the Govern- 
ment's scheme for settling Germans on these 
Polish lands, meets with the greatest diffi- 
culty in buying land from Poles, but on the 
other hand, it is forced to buy out every 
German holder who wishes to sell, else his 
land will again fall into Polish hands. The 
commission bought more than 100,000 acres 
of land last year, and only about 7,000 acres 
of that was acquired from Polish owners, 
while well over 90,000 acres were taken 
over at high prices from Germans who 
wanted to leave the country or wished to 
abandon the farm for the town. 

The Government has settled about 50,- 
000 Germans upon these Polish lands since 
the policy was inaugurated. This artificial 
competition for land which has been going 

398 



Political Problems of Europe 

on between the Government Settlement Com- 
mission and the PoHsh Landbanks has re- 
sulted in absurd advances in prices. For 
some years after the Settlement Commis- 
sion began its operation, land was bought 
at an average of $54 an acre. By 1902 the 
price had risen to $87 per acre, and last 
year to $111. 

The two races have come to a deadlock 
in their relations with each other. Every 
year there is a great Polish debate in the 
Reichstag, but it only serves to bring out in 
bold relief the irreconcilable antagonism be- 
tween German and Pole. 

The significance of the language question 
is well understood by the European mon- 
archs. In the Park Club in Budapest, the 
club of the Magyar aristocrats, which cannot 
be matched for artistic beauty of furnishing 
by any of the marble halls of our gaudy 
American clubs, there hang two portraits, 
and only two. One, of course, is that of the 
Emperor Franz Josef; the other is William 
11. 

I asked how it happened that the German 
Emperor was so honored. 

" He has had his second son taught the 
Magyar language," answered my host. 
" That boy may sometime wear the crown of 
the Magyar kings." 

And there might be stranger things. 

399 



Business and Education 

Russia has her full share of racial diffi- 
culties, and in her conflict with Poles, Finns, 
and Jews has been led into injustice and bar- 
barity of the sort that makes two enemies 
of the Government where there was one 
before. 

Comparisons of the problems which be- 
set the European governments with the diffi- 
culties that are met with in our own institu- 
tions cannot help but make us better satisfied 
with American citizenship. 

We find there implacable racial differ- 
ences, varied degrees of political develop- 
ment which it is vainly sought to unite into 
harmonious empires, relics of feudal au- 
thority, hereditary distinctions, and class 
prerogative quite out of line with a modern 
conception of representative government. 
There are diametrically opposed interests 
of agriculture and industry which can never 
be reconciled. We see a drawing of class 
lines in political life, and appeals to the 
passions of envy and greed, and to the prej- 
udices of caste and ignorance. It is start- 
ling to note what enormous factors in the 
situation are the personalities of half a 
dozen hereditary sovereigns, and what sig- 
nificance and possibilities lie in the mere 
chance readjustment of a crown. We see 
the growing strength of the parties of pro- 
test, the vitality of the Socialist movement, 
400 



Political Problems of Europe 

the difficulties of government finance, the 
weight of taxes, the load of the military 
and naval establishments, the menace of war, 
the ever-living danger in close national 
neighbors who misunderstand motives and 
lack sympathy for the trials and ambitions 
of the others — and then, when we turn to 
our own political situation, we see a nation 
greater in numbers and vastly greater in 
resources than any of the nations of Europe, 
with a single language, and with but a single 
problem of race, and with a common pa- 
triotism that every one knows is far above 
party differences. When the political con- 
ditions of Europe and America are so com- 
pared, the study can but make us thankful 
that we have such a sound foundation upon 
which to grow, and so few complications to 
interfere with our right development. 

IV. Government Education 

In determining the relative efficiency of na- 
tions competing in the commercial and in- 
dustrial fields, there are several factors of 
prime importance. The nature of the Gov- 
ernment, the character of the people, the 
natural resources of the country, each have 
distinct influence. All government grows 
better, so there is a tendency toward equal- 
ization of advantages in this respect. Cheap- 
26 401 



Business and Education 

ness of transportation tends to equalize the 
disadvantages of a lack of raw material. 
Hereditary, racial, and climatic influences 
are each important in determining the char- 
acter of the people, and so far as char- 
acter is influenced by these factors it changes 
slowly. The quickening influence that may 
bring rapid change in the national character- 
istics of a whole people, and that may be- 
come of immense importance to their indus- 
trial efficiency, is education. 

In any study of the comparative indus- 
trial efficiency of nations some comprehen- 
sion of the scope and tendency of their edu- 
cational system is of the greatest impor- 
tance. As industry becomes more and more 
highly organized and commerce more wide- 
spread and complex the influence of educa- 
tion is a factor of rapidly increasing 
importance. 

The President of one of the great railway 
systems of the United States once expressed 
that fact to me in this way : 

" As railway business in the United States 
is developing," he said, " and as the organi- 
zation of the business of transportation be- 
comes more complete, there is working a 
distinct change in the character of the men 
required for the successful operation of our 
properties. While the railroad business was 
in something of a pioneer stage, men were 
402 



Political Problems of Europe 

required who had native force, who would 
quickly and successfully meet every form of 
obstacle. In the West particularly, we de- 
veloped a corps of railway employees who 
for resourcefulness, vigor, and strength were 
probably never equalled in any other sort of 
organization. The requisite then was to get 
the thing done, to get the train through, to 
repair the washout, to get the wrecked en- 
gine back on the track, to move the traffic. 
It did not matter so much how it was done. 
The point was to get it done, and methods 
were evolved which were never heard of in 
the most advanced schools of technology. 
For a good many years not much attention 
was paid to the refinements of traffic statis- 
tics. We were not interested in the particu- 
lar fraction of a mill which it cost to move 
a ton of freight a mile. We were just in- 
terested in moving it, and the most resource- 
ful men, the men who would best overcome 
unexpected difficulties, and do it quickly with 
the very limited resources which were at 
command, were the men who were most suc- 
cessful in the railway field. 

" All that is changing, and in many sec- 
tions of the country has already completely 
changed. In those days that are past a 
technical education counted for little. All 
the knowledge that a man ever got out of a 
technical school would not have helped him 

403 



Business and Education 

much in many of the emergencies which 
were the daily hfe of raih'oad managers. 
Resourcefulness, mother-Avit, determination, 
and strength were what was wanted. But 
the men who possessed these characteristics, 
and who made the greatest success in rail- 
road business under those pioneer condi- 
tions, began later to find that there were men 
growing" up in the organization of the older 
roads who could design a locomotive that 
would pull a longer train than any they could 
move, and do it with less coal ; men who 
could build stronger bridges for less money, 
because they could calculate to a mathe- 
matical nicety strain and strength of ma- 
terial ; men who, though they might be lack- 
ing in those forceful characteristics which 
had brought success on the new roads, were 
able, with their thorough technical knowl- 
edge, to reduce cost, to effect economies, to 
perfect systematic organization, and to con- 
tribute toward the creation of a railway sys- 
tem so smoothly running and so well organ- 
ized that the very emergencies which the 
pioneer railroad men had made their repu- 
tations in meeting will never arise. We still 
want resourcefulness, vigor, and force, but 
those qualities must now be coupled with 
technical knowledge. Other things being 
equal, the railroad with the best educated 
staff will be the most successfully operated." 
404 



Political Problems of Europe 

The view of this railroad president in his 
own field, I- believe, illustrates what is much 
the same condition in almost every line of 
industry. American resourcefulness has 
been the wonder of the world, and has ac- 
complished, surrounded as it has been with 
unparalleled richness of raw material, an 
unequalled industrial development. But we 
are reaching a point, and the older nations 
of the world have long before us reached 
that point, where it is of great importance 
that technical training and scientific educa- 
tion shall be brought to bear on every phase 
of industrial organization. I believe that 
the relative efihciency of nations was never 
before so largely influenced by the character 
of their educational facilities as is the case 
to-day. The tendency in our whole indus- 
trial and commercial life is rapidly giving 
added importance to education. 

It is, I know, a somewhat common view 
that the great industrial organizations which 
are the order of the day tend to reduce the 
workers to little more than automatons. 
Some people believe that education is be- 
coming of less importance, because they 
see that there is a tendency toward subdi- 
vision of labor in these great organizations, 
resulting, as it does, in so arranging the 
work that men do their appointed task with 
the smallest need for thinking, and with 
405 



Business and Education 

less requirement in the way of mental train- 
ing than was the case before those indus- 
tries were so highly specialized and the work 
so subdivided. That view is correct as ap- 
plied to a great mass of workers. The 
automatic machine needs little more than 
an automatic mind to run it. Our great 
locomotive shops, for instance, have so sub- 
divided the work, and have produced so 
many special and almost automatic machines 
for forming each part, that they can take men 
off the streets with no knowledge of mechan- 
ics, and have them thoroughly trained in a 
fortnight to do some particular piece of work 
which would, under the old methods of shop 
practice, have required a highly skilled and 
experienced machinist to perform. 

These industrial combinations and con- 
solidations which may bring almost an en- 
tire industry under a single management, 
create a demand for educated labor, how- 
ever, which is keener than ever could have 
been known under a system less highly 
specialized. 

Take, for example, an industry in which 
there were, say, one hundred individual or- 
ganizations, each one producing an average 
product costing $100,000. An industrial 
chemist might, with his technical knowledge, 
we will say, effect a saving of one per cent in 
the cost of this product. Suppose that were 
406 



Political Problems of Europe 

made clear to any individual employer. He 
would say that, although he might effect a 
saving of $i,ooo in the cost of his year's out- 
put, the salary of the chemist would be 
$5,000. He could not afford the economy. 

With these industries all combined the 
chemist's $5,000 salary could be paid, and 
from the one per cent saving in the cost of 
the total product a profit of $95,000 left as 
a result of the economy effected. 

As combinations are made in the indus- 
trial field, the possibility of employing highly 
trained technical experts rapidly increases, 
and in that possibility alone lies frequently 
one of the greatest incentives toward com- 
binations. The margin of profits some- 
times grows very narrow under the stress of 
international competition. Where there is 
sharp international competition the pros- 
perity of a whole industry might easily de- 
pend on whether or not each one of its proc- 
esses were conducted according to the very 
best practice the ablest technical experts can 
work out. 

Technical training is therefore becoming 
of vastly more importance than ever before, 
and those nations which are offering the best 
technical training to their youths are making 
the most rapid industrial progress. A study 
of the international field brings that fact out 
with perfect clearness. Where education is 
407 



Business and Education 

lacking industry is lagging ; where education 
is stereotyped industry is without initiative. 
The necessity for thorough education and 
the best technical training has become al- 
most as great in commercial affairs as it has 
in the industrial field. The methods of com- 
merce to-day cannot be as easily compared 
with the methods of a generation ago as can 
the processes of industry now and at that 
time, but I believe that the changes in the 
methods of commerce have, in many cases, 
been as radical and the improvement as great 
as in the field of industry. Two generations 
ago the trained engineer was looked on with 
disfavor by the practical industrial manager. 
The man who grew up in the business was 
thought far superior to the man who got his 
knowledge from books. The necessity for a 
technical engineering training is now uni- 
versally recognized, and no important indus- 
trial operation would be undertaken without 
the aid of technical experts. I believe the 
same change is coming in commercial life. 
The commercial high schools of Germany 
and the start in higher commercial education 
which we are making in this country are the 
forerunners of great technical schools of 
commerce. These schools will turn out men 
with as superior qualifications for commer- 
cial life as have the graduates of the great 
technical institutions in their special field. 
408 



Political Problems of Europe 

I believe the great masters of commerce will 
come to recognize the necessity for and the 
practical advantage of such commercial 
training, just as the captains of industry 
have long ago recognized the value of tech- 
nical training for engineers. 

The requirements for the successful ad- 
ministration of great commercial enterprises 
are greater than ever before. The scale upon 
which these enterprises are organized war- 
rants the payment of high salaries to men 
with the best training, and I believe that 
those nations that are providing schools best 
adapted to the thorough training of recruits 
for the ranks of commerce will make the 
greatest progress in developing the commer- 
cial side of the national life. 

Education in its relation to national de- 
velopment is viewed from two fundamentally 
different standpoints. In America we have 
in large measure regarded the universal 
education of citizens as necessary to the 
proper political development of the repub- 
lic. The idea underlying our whole educa- 
tional system has been that the sovereign 
citizen must be given such training as will 
enable him to form his political opinions 
with intelligence and to vote with under- 
standing. The effect of education upon 
commerce and industry has been quite a 
secondary consideration. In the main the 
409 



Business and Education 

work of the schools has been directed toward 
turning out intehigent citizens, and but com- 
paratively little attention has been given to 
so shaping education that it will make of 
each student the most effective industrial 
unit that it is possible to produce. 

In Europe education has been viewed 
from a different standpoint. The theory of 
education in Germany has been that it should 
be the work of the Government schools to 
turn out the most efficient economic units, 
while the tasks of the captains of industry 
were to organize these units into the most 
effective economic corps possible. The re- 
sult has been the most thoroughly trained 
and organized system of industry in the 
world, with the possible exception of our 
own, and, in many respects the German sys- 
tem presents points of superiority even in 
comparison with our own industrial system. 

The German Government years ago de- 
liberately set to work to organize a system of 
education which should be a means of na- 
tional development. The idea was not that 
education was needed to make intelligent 
citizens, but that it was needed to make 
effective industrial units. Intelligent citizen- 
ship has really had small place in the cen- 
tralized personal government which the 
Kaiser has developed, but in no other nation 
has there been such intelligent administra- 
410 



Political Problems of Europe 

tion of the system of education from the 
point of view of training men to work 
efficiently. 

In France there has been quite another 
fundamental idea underlying the whole de- 
velopment of education, and impressing it- 
self strongly on the national character. The 
school system of France seems to have been 
designed neither to make intelligent citizens 
nor to turn out effective economic units. It 
seems rather to have had for its object the 
preparation of persons to pass certain Gov- 
ernment examinations. A double incentive 
has existed of sufficient potency to shape al- 
most every mind of France in this hard and 
fast mould of stereotyped education. This 
twofold incentive has been on the one hand 
the securing of a reduction of the forced 
military service, and on the other the open- 
ing of the way to a civil-service appointment. 
The student who succeeds in passing the 
Government civil service examination may 
reduce his military service from three years 
to one. There is absolute democracy in the 
French army, neither birth nor wealth offer- 
ing any escape from the military service. 
The one way leading to a reduction in the 
length of that service is through a Govern- 
ment examination. It is easy to see, there- 
fore, how universal must be, in every walk of 
life, the incentive to mould the minds of 
411 



Business and Education 

children along only these stereotyped lines 
which the Government examiner recognizes 
as an education. 

It is through this same door that entry 
must be made to a civil service position, and 
there is nothing short of a mania in France 
for drawing a public salary. The result has 
been the most uniform and stereotyped sys- 
tem of training that youths were ever sub- 
jected to. There are nearly 400,000 paid 
officials under the French Government. For 
every voter one person holds some sort of a 
public office. The French characteristic of 
thrift has resulted in giving a vast num- 
ber of people small incomes from their in- 
vestments. Economy is little short of a 
national disease in France. This army of 
small investors has incomes insufficient to 
support them in idleness, but large enough 
so that, with only a small addition in the 
way of a salary, the financial problem of life 
is solved. That is the reason why there is 
such a universal desire among the middle 
class for Government employment, and why 
the incentive to obtain an education ena- 
bling one to pass a Government examination 
is so overpowering. 

There were recently vacancies for four 

clerks in the office of the prefect of the 

Seine. For these four positions there were 

registered 4398 applicants. Washington at 

412 



Political Problems of Europe 

its worst surely has nothing comparable to 
that. Every one of these 4000 applicants, 
however, could have passed an examination 
along certain stereotyped lines which would 
have delighted the hearts of our civil service 
reformers. 

The result of the French system of educa- 
tion has been to produce an extraordinary 
uniformity of mental type and capacity, es- 
pecially among the middle classes. The 
French system of education is intensely na- 
tional. Its plan is exactly the opposite from 
our own school system. With us the local 
community controls primary schools. In 
France the local community has no voice in 
the matter. The French system is the most 
centralized, the most strictly regulated, the 
most autocratic, and the farthest removed 
from democratic ideas of any other school 
system in existence. The exact uniformity 
of the schools is almost unbelievable. The 
Minister of Instruction, sitting in his office 
in Paris, can tell at any moment just what 
fable of Fontaine each child of a certain age 
throughout the whole of France is reciting. 
Teachers are not allowed any latitude at all. 
The result is to leave both teachers and 
scholars almost completely lacking in peda- 
gogic originality. 

The whole national life is being affected 
by this uniform system of education. The 

413 



Business and Education 

corps of teachers has all been made in the 
same mould. All have passed through an 
exactly similar training. All have passed 
successfully exactly the same Government 
examinations. The Government tries to 
break in on this deadly uniformity by mak- 
ing a point of sending teachers to other than 
their native districts. Northern teachers are 
sent to southern schools and southern teach- 
ers to northern schools. By this plan the 
Government possibly does something to fos- 
ter a spirit of unity throughout the nation, 
but the uniform mould into which every 
mind is forced remains the same. 

There is no tendency in France toward 
making the educational system less uniform. 
The victory of the Government over the 
religious orders and the consequent closing 
of the clerical schools will have the effect of 
making the system more stereotyped than 
ever. There are French educators who de- 
clare that the whole school system of France 
has been shaped into a huge civil service 
employment agency. They admit that true 
education has been forgotten in the effort to 
coach children to pass certain fixed examin- 
ation forms. 

There has seemed to be no room in France 
for the growth of secondary schools or col- 
leges — schools of which it is a man's pride 
to be an alumnus, and where a fellowship 
414 



Political Problems of Europe 

develops that is an important influence all 
through life. There are no such schools in 
France as Rugby and Eton. It is never re- 
garded of special importance where a man 
was educated, and college friendships play 
a smaller part in after-life than is the case 
with us or in England and Germany. The 
university life in, France is gathered almost 
wholly in a single institution in Paris, in- 
stead of being scattered through all the 
provinces, as in Germany. The so-called 
French colleges are not comparable in organ- 
ization with the German gymnasiums of the 
various grades. The technical schools, on 
the other hand, have been much more dif- 
ferentiated in France than in Germany, and 
instead of gathering civil engineering, elec- 
trical engineering, and mining engineering 
into a single great technical school, these 
subjects are taught in separate schools. The 
trade schools are strong in the lines of ar- 
tistic decoration. In some respects they are 
the best of the whole French educational sys- 
tem. They are in the main not a part of the 
national system, but are under the control of 
individuals. 

The French school-boy is taught facts. 
Facts are ground into him with cruel dili- 
gence. The American boy would be stag- 
gered by the tasks that are set him. The 
hours that he spends in memorizing make 

415 



Business and Education 

the French school system resemble the 
Chinese. Few school-boys in other coun- 
tries have so much work to do. None are 
so systematically and persistently crammed 
with knowledge. But the French school-boy 
is not taught to think. The result of such 
a system of education is revealed in the 
national life. France to-day of all great 
nations is characteristically without initi- 
ative. She is not maintaining her place in 
the first rank of nations. So far as the 
great middle class is concerned, France is 
decadent. It is true that there are painters, 
poets, and authors who are geniuses that any 
nation would have been proud of in any 
period, but they are the exceptions. Their 
minds have escaped the deadly process of 
stereotyped French education. The rule 
has been the making of a nation with minds 
all formed in one mould, a nation which is 
stationary in its commerce, its industry, and 
its business development, and which is push- 
ing on to no new accomplishments. 

The French have wonderful ability for 
certain skilful and artistic forms of work. 
Their industries are less open than those of 
any other country to the competition of auto- 
matic machines or of work done en masse. 
No tariff walls are effective barriers against 
superior taste and art. That fact alone is 
what saves the industries of France. She 
416 



Political Problems of Europe 

has neither the commercial vigor and initi- 
ative nor the abiHty for commercial and in- 
dustrial organization to enable her to com- 
pete with Germany or the United States in 
any of the great fields of international 
industrial competition. There is none of the 
modern spirit of industrialism which mani- 
fests itself in that superior organization and 
combination which are the keynotes of 
industrial life in Germany and the United 
States. There are lines of artistic accom- 
plishment in which she stands unchallenged, 
but in industrial organization she has not 
taken the first steps. Perhaps all this may 
offer ground for congratulation rather than 
regret, but it is, at any rate, an obvious fact, 
and one that can in no small measure be 
traced to the French system of education and 
its effect in shaping the national character. 

In England as well as in France the sys- 
tem of education has produced marked effect 
upon the national character. France has 
just been through a great national struggle 
to free herself from the clerical schools. 
Education in England is still in the hands of 
the clericals. It is not in the control of the 
teaching orders of the Catholic Church, it 
is true, but it is practically under a control 
exercised by the Church of England. It is 
possible that such a control of education is 
beneficial to the morals of the English youth. 
27 417 



Business and Education 

There can be nothing more certain, however, 
than that it has proved a stumbhng block in 
the development of anything like a modern 
system of education. The Education Bill 
passed two years ago makes it obligatory 
that at least half of the teachers in the public 
schools must in the future be members of the 
Church of England. The result of the con- 
trol which the Church has always exercised 
in greater or less degree has not been one 
which w^ould lead educators to believe that 
a school system can develop along the best 
lines when under the control of any single 
religious organization. There is nothing in 
the development of the English school sys- 
tem up to the present that leads one to be- 
lieve that the Church organization is well 
adapted to direct a modern system of pri- 
mary education. 

In America we find a school system de- 
signed to make intelligent citizens; in Ger- 
many, a system intended to produce the 
most efficient economic units possible; in 
France a system designed uniformly to 
mould all minds to pass through the door of 
a Government examination, the only door 
which opens to a reduction of the forced 
military service, and to possible civil em- 
ployment. In England none of these stand- 
ards seem to have been set up. While the 
corner-stone on which the great German 
418 



Political Problems of Europe 

Empire has been built has been an educa- 
tional system designed and recognized as a 
means of national development, the states- 
men of Great Britain have never given 
thought to education from that point of 
view. No British statesman seems ever to 
have conceived that a perfect system of edu- 
cation would redound to national greatness. 
Colonial expansion, military efficiency, naval 
strength, and the power of accumulated 
wealth have each in their tufn appealed to 
Englishmen as foundation stones upon which 
to build a greater Britain, but the thorough 
education of the people has not been recog- 
nized as one of the most substantial of foun- 
dation stones. The upbuilding of a general 
system of education as a means for national 
development has never received the serious 
study of a representative body of English- 
men. 

The debates upon the Educational Bill two 
years ago, dragging through months of par- 
liamentary consideration, never once rose to 
an intelligent and comprehensive discussion 
of Great Britain's needs in the way of a 
better school system. To my mind there is 
the most obvious evidence of that need. 
Parliament, however, spent its time debating 
over just what measure of control the 
Church of England should have, and what 
small voice the dissenters would be permitted 
419 



Business and Education 

to raise. There were days of discussion of 
these points without the slightest recogni- 
tion of how great is England's need for a 
thoroughly efficient modern school system. 

There are a great many very excellent 
people in England who do not believe in 
universal education. I have talked with 
university men who hold the carefully con- 
sidered opinion that universal education, ex- 
cept of a most elementary sort, is not de- 
sirable for the nation. They believe that a 
serving class is necessary, and that education 
only tends to make such a class dissatisfied 
with its lot. Recognizing that there is a 
great amount of unskilled work to be done, 
they think that education does not help a 
man to do it, but may tend, rather, to make 
him dissatisfied to work on as his fathers 
have worked. Such an opinion, I believe, 
is pretty widely held in England, and any 
scheme looking toward carrying universal 
education beyond the most primary limits 
would be regarded by a large number of 
admirable people with disfavor. 

The British Government has no disposi- 
tion to load the national budget with any 
further increases on account of education. 
Since the South African War the Chancellor 
of the Exchequer has found many serious 
problems in the budget. It was found pos- 
sible to raise a billion two hundred million 
420 



• Political Problems of Europe 

dollars for the prosecution of the Boer War, 
but English statesmen do not feel that the 
Government can afford to recognize any new 
claims on the budget for the support of 
education. 

That was well illustrated recently when 
the representatives of all the universities in 
England held a conference with the Prime 
Minister and the Chancellor of the Ex- 
chequer. At this meeting it was sought to 
impress upon the Government the advisa- 
bility of a more liberal attitude to the higher 
institutions of learning. The object of the 
meeting, as stated by Professor Pelham of 
Oxford, was " to impress upon the Govern- 
ment certain facts, long recognized abroad, 
and gradually forcing their way to recogni- 
tion in England, the facts being that there 
was such a thing as knowledge, that it was 
as well worth having for nations as for indi- 
viduals, and further that it could not be had 
without paying for it." 

In stating the claims of the institutions of 
higher learning for some support, Mr. 
Chamberlain, speaking as chancellor of the 
University of Birmingham, said : 

" In the competition we now have to en- 
dure with foreign countries, higher educa- 
tion is a matter of the first importance. 
Those who are to be leaders of industry, 
managers of our works, foremen in our 
421 



Business and Education 

shops, should have a much higher education 
than the mere ' rule of thumb ' knowledge 
they have possessed up to the present. It is 
to provide these men, who will, by their work 
hereafter, I believe, return a splendid divi- 
dend on the money we spend, that we have 
promoted these local universities, and that 
we now come to the State and ask it to take 
our needs into consideration. Already the 
State pays something like £13,000,000 a year 
for primary education, but only a few thou- 
sand pounds are found for the higher edu- 
cation to which we have learned to attach so 
great a value." 

Sir William White, President of the So- 
ciety of Civil Engineers, told the Prime Min- 
ister that if the position of Great Britain 
was to be maintained, it was absolutely nec- 
essary that the system of educational in- 
struction be placed on the best possible basis. 
While Great Britain still held a lead in ship- 
building, for example, both Germany and 
the United States were far ahead of Great 
Britain in the scientific instruction needful 
for ship-building, and unless the scanty pro- 
visions now existing in England for such 
instruction is placed more on an equality 
with the provisions in Germany and the 
United States, that lead may be difficult to 
maintain. 

Other speakers recognized the need and 



Political Problems of Europe 

deplored the deficiencies of scientific training 
and the work of research in England, and 
declared that the English institutions were 
handicapped by the lavish expenditures of 
Continental governments and the munificence 
of private liberality in the United States. 

Mr. Mosely, who at the head of a com- 
mission had given the system of education 
in the United States most careful study, said 
that he was so impressed with the advances 
in this country that he had decided to send 
his two sons to college here. 

The Chancellor of the Exchequer, in reply 
to these representatives of higher education, 
declared that, in his opinion, it would be a 
great misfortune if it were once to be thought 
that it was the duty of the State to furnish 
the whole or the main portion of the cost of 
the higher education of the country, or even 
if the State were to come into such relations 
toward university education as it now oc- 
cupies toward elementary education. The 
prospect for any considerable State aid to 
higher education in England, he said, is a 
long way ofT. 

The need for that aid, and particularly the 
need for great improvement in the facilities 
for technical education, is immediate and 
obvious. In my opinion, no small part of 
England's loss of prestige in the world's 
commercial life — and that there has been a 

423 



Business and Education 

relative loss there can, of course, be no 
doubt — is due to the failure of the great 
body of representative and intelligent men 
who shape English public opinion to recog- 
nize the important influence of an adequate 
school system upon the national development. 
There has been no disposition in England 
to adopt the view which underlies the whole 
German educational system — that is, the 
deliberate creation by the State of a school 
system as a means for national development. 
English statesmen have not recognized that 
through developing by thorough education 
the effectiveness of each individual in the 
nation a great stride is taken in the develop- 
ment of the nation itself. 

Trade education in Switzerland has been 
carried out as completely as in any other 
country in Europe. The larger towns in 
Switzerland are probably better provided 
with such schools than any towns of the 
same size in the world. Cities like Zurich, 
Easel, and Bern have important technical 
schools, but the system is carried out as well 
in the smaller towns. The Government has 
done a great deal in the way of encouraging 
exhibitions and sending out travelling sam- 
ple collections throughout the country. It is 
the boast of Switzerland that none of her 
industries are without sufficient agencies for 
providing the requisite special study and 
424 



Political Problems of Europe 

training, and these agencies are generally 
situated near the local centre of each indus- 
try. There are preparatory schools for 
watch-making, for weaving, for wood-carv- 
ing, stone-cutting, dress-making, pottery and 
toy-making, as well as many schools for 
women for domestic training. There are 
schools for many of the smaller house in- 
dustries, which occupy a peculiar place in the 
commercial make-up of Switzerland. 

There seems to me little room to question 
the general superiority of the German sys- 
tem of education. That it is on the whole 
superior to the systems in vogue in England 
or the other countries in Europe is, I think, 
generally recognized. That in some of its 
particulars it is superior to our own system 
can, I believe, be readily established. These 
points of superiority are giving the German 
Empire substantial vantage-ground in its 
commercial competition with the world. The 
plan underlying the whole educational sys- 
tem there, of developing each individual to a 
point of the highest industrial or commercial 
efficiency, gives a practical trend to educa- 
tion which, with us, is not paralleled. 

From the point of view of increasing the 
industrial efficiency of a nation, Germany 
has, it seems to me, worked out some features 
of her educational system in a way distinctly 
superior to conditions in the United States 
425 



Business and Education 

or any other country. The Germans have 
reasoned that if education is to meet the 
needs of a wide diversity of calhng, it must 
itself be adapted to the diversified needs of 
the men who are to be educated. It is not 
surprising to find in the larger German cities 
a fully established educational system, wdth 
all the ordinary facilities of university and 
technical schools, gymnasium, preparatory 
and day schools, all excellently conducted and 
thoroughly up to date in their methods. All 
that one would expect to find there. The 
point where there is distinct and novel su- 
periority is in the completeness of the sys- 
tem of evening schools of the several classes 
and the provision for trade schools. No 
German youth need go without either a gen- 
eral or a technical education, no matter what 
his circumstances. For those who leave 
school after the age of compulsory attendance 
is past, there are evening schools for general 
education and trade and technical schools 
of the widest diversity of scope. Whatever 
trade a German youth may pursue he will 
find open to him evening schools in which he 
may improve himself in his trade, may 
strengthen his technical knowledge so as to 
fit himself for a higher position, and at the 
same time may have his " formative power," 
as the Germans call it, strengthened and 
diversified. 

426 



Political Problems of Europe 

This is the underlying idea in the whole 
German educational system : first of all, a 
certain fundamental set of subjects well 
learned, such as elementary mathematics, the 
German language, and possibly some for- 
eign language; after that the opportunity, 
whatever the man's circumstances, to im- 
prove himself in his trade and in his general 
education, either in a day-school or in a 
night-school. In other words, a series of 
schools so diversified as to serve the interests 
of every class in the national population. In 
Berlin and in most German cities these 
trade schools, such as those for shoemakers, 
tailors, carpenters, metal-workers, masons, 
etc., have been conducted with very friendly 
relations with the unions ; and in many cases 
the boards of inspection have upon them 
members of the trades-unions. 

The perfection of this plan in Germany 
comes from the fact that the direction of the 
State departments of education in the vari- 
ous German states, but particularly in Prus- 
sia, has been for many years in the hands of 
very able men; the development, for in- 
stance, of the Berlin system of evening 
schools, begun some twenty years ago, was 
carried out under the direction of the best 
men of the city. 

So far as the highest institutions for tech- 
nical learning are concerned, Germany prob- 
427 



Buskiess and Education 

ably has little, if any, advantage over us, 
although, in certain fields, and fields of great 
commercial importance, we are notably de- 
ficient. That is particularly true in the field 
of industrial chemistry. In the practical ap- 
plication of expert chemical knowledge Ger- 
many leads the world so far that other 
nations are quite outclassed, and the reason 
for that must be found in the superiority of 
her schools. Germany's prominence in that 
one field is an enormous aid to her in gaining 
and maintaining her industrial leadership. 

Germany is a land of small salaries, and 
we are supposed to be ready to pay more 
than any country for the desirable services 
of any man. I was surprised, therefore, to 
learn that we could not attract some of the 
great professors of industrial chemistry to 
our own institutions, because we could not 
pay salaries that would approach the sala- 
ries which they received in Germany. In 
this field of industrial chemistry there has 
been developed close relations between the 
academic and the practical. A professor of 
industrial chemistry in one of the great 
technical schools will not only be regarded 
as a leader in scientific circles, but he will oc- 
cupy an intimate and most remunerative re- 
lation toward industrial enterprises. I was 
told that the professor of industrial chem- 
istry in the technical high school of Charlot- 
428 



FoUtical Problems of Europe 

tenburg- received a salary of $25,000 a year. 
When our own institutions have endeavored 
to secure men of this type from Germany 
they have invariably found it impossible be- 
cause the remuneration there was more than 
our institutions could afford to pay. The 
higher remuneration in Germany is possible 
because of the intimate relation which has 
been built up between the schools and the 
great industries. The problems which came 
before the managers of these industries are 
laid before the technical schools, and the 
schools are well paid for solutions of those 
problems. Then, in turn, industry flourishes 
because of the superior methods which these 
technical experts invent. 

It is not my purpose to attempt anything 
like a complete description of the German 
system of education. That has been done 
many times by observers much better quali- 
fied. It is only toward some phases of the 
situation that I would direct attention, and 
toward some of the features which, in a 
casual observation, have seemed to me spe- 
cially interesting. 

In primary education I am told that there 
are two principal tendencies characteristic 
of the development of the curriculum 
throughout Germany. One is toward the 
training of the mental perceptions, the power 
of original observation ; the other is in the 
429 



Business and Education 

direction of the development of oral expres- 
sion. This is exactly the opposite of the 
tendency in French education, where learn- 
ing by rote, memorizing facts, and preparing 
to pass stereotyped written examinations are 
the order. The German point of view^ is 
that pedagogy is a scientific branch of knowl- 
edge based on definite laws of psychology, 
and that further discoveries are being made 
from time to time in this as well as other 
sciences. It is held, therefore, that any edu- 
cational system which rests on the mechan- 
ical application of certain methods merely 
because those methods have long served a 
useful purpose is as foreordained to ineffi- 
ciency and ultimate failure as would be the 
doctor or chemist who declines to avail him- 
self of fresh discoveries of modern science. 
The whole system of education in Germany 
is a living thing, totally unlike the system 
either in France or in England. 

The American boy who had to endure the 
regime of either the French or German 
schools, would, so far as downright hard 
work is concerned, look back upon his home 
experience as being almost an idle holiday in 
comparison. In the elementary schools in 
Berlin and Charlottenburg, and I presume 
elsewhere in the empire, the schools meet at 
seven o'clock in the morning in summer and 
at eight o'clock in winter. The habits of the 

430 



Political Problems of Europe 

gymnasium are carried into the classroom, 
and great attention is paid to pose and move- 
ment. Any tendency toward slouching is 
sharply checked, and smartness of bearing 
is carried almost to an extreme. The in- 
fluence of the army is already felt the mo- 
ment the boy enters his first class. 

One feels in Germany that the whole na- 
tion is at school. All public institutions 
make special provisions for school-children 
as a class. Churches have reserved seats 
for them, theatres give special performances, 
and railways and steamships are required to 
give special rates to school-children accom- 
panied by their teachers. There is compul- 
sory education for children from six to 
thirteen years of age in the country, and 
from six to fourteen years in the city. Com- 
pulsory education is practically fully realized. 
The average daily attendance is about ninety 
per cent of the total enrolment. The habit 
of school attendance in Germany has become 
almost automatic. Parents are fined from 
one penny to a mark a day for every day 
a child is absent without a proper excuse, 
and are actually imprisoned if the fine is not 
immediately paid. 

It is not in primary education, however, 
that the marked superiority of the German 
system, in Its effect upon the industrial 
efficiency of the nation, offers such sharp 

431 



Business and Education 

comparison to the conditions in other coun- 
tries. It is in the industrial education, which 
beyond question is one of the most powerful 
weapons of Germany industry. The indus- 
trial schools of Germany have been pictur- 
esquely described as the " ironclads " of com- 
merce. 

One feature of industrial education which 
has no parallel outside of Germany is the 
universal provision for trade schools. Not 
only are many of these founded and sup- 
ported by the State, but there are also a 
great many maintained by local guilds and 
industrial associations. Our own labor or- 
ganizations are antagonistic to apprentices, 
and look with no favor on trade schools. 
Labor unions are not strong in Germany, but 
even where they do exist their attitude to- 
ward education is not only friendly, but 
actively helpful to the extent of contributing 
toward the support of trade schools. 

These trade schools offer the opportunity 
of acquiring a technical training in almost 
every trade. In the main the students are 
already active workers in the trade in which 
they seek a higher technical knowledge. In 
these trade schools is an exposition of the 
most modern methods of work, and there is 
shown there the latest development in ma- 
chines and inventions. The teachers, as a 
rule, have a good preparatory training and 

432 



Political Problems of Europe 

come directly from the trade which they aim 
to teach. Frequently they work at the trade 
during the day and teach in the evening and 
on Sundays. They are, therefore, fresh and 
thoroughly up to date in their practice. A 
most important feature of these trade schools 
is that they do not stop at the purely tech- 
nical side of the trade, but seek to insure 
wise business management by including 
studies which prepare the student for the 
practical conduct of the business. Side by 
side with the technical training are given the 
general facts of production and consumption, 
of cost prices and market values, in the par- 
ticular trade in which the student is inter- 
ested. He is taught bookkeeping in its most 
practical application to his especial business, 
and is made familiar with the legislation of 
importance to his particular industry. 

These trade schools offer opportunity not 
only to those who can afford to substitute 
them for regular school work of a more aca- 
demic character, but they are specially ar- 
ranged to accommodate students who must 
work during the day. It strikes one rather 
oddly to find how generally Sunday is given 
over to this sort of instruction, and that 
thirty-five per cent of the total hours of in- 
struction in the industrial schools of Saxony, 
for instance, fall on Sunday. This general 
devotion of Sunday by thousands of German 

28 433 



Business and Education 

youths to the gaining of instruction in the 
scientific and technical sides of their chosen 
trades contrasts curiously with the tremen- 
dous pother which is going on in England 
over what voice the Established Church will 
permit the non-conformists to have in the 
religious instruction which forms an im- 
portant part of the curriculum of every 
school day, for that practically is the para- 
mount school question in England. 

These German trade schools are undoubt- 
edly having an enormous effect upon the 
industrial efficiency of the whole nation. 
They are designed to train the rank and fide. 
It is in the great high schools that the officers 
of industry are trained. 

The most interesting educational move- 
ment in Germany to me is the development 
of higher commercial education. We recog- 
nize that an engineer or a mechanic will 
profit by a technical education. There is 
no longer a doubt that a technical education 
will enable such a man to outstrip in the long 
run his fellows who have equal ability, but 
have learned only in the slower and less 
scientific school of experience. There are as 
good reasons, I am convinced, for giving the 
banker or the merchant a technical commer- 
cial education. The schools do not turn out 
a practical engineer, nor will they turn out 
a practical banker or merchant, but I believe 

434 



Political Problems of Europe 

that there is a great amount of information 
needed by a man in commercial Hfe which is 
capable of scientific classification, and can 
be taught with much greater efficiency, and 
with much less loss of time, in a properly 
organized school than it can be gathered in 
the ordinary course of an apprenticeship in a 
business career. 

The German Handelshochschule, or com- 
mercial high school, is not a parallel to 
our high schools, but is of a university type. 
These H andelshochschiilc are designed for 
students who already have an education 
equivalent to that obtained in our high 
schools, or perhaps even in our colleges, and 
who have also two or three years of business 
practice. The scheme of these schools is to 
educate men for the high positions in com- 
mercial life. They are not for ordinary 
clerks, for whom an ordinary Handelshoch- 
schtde offers satisfactory preparation. 

In outlining the aim and work a professor 
in one of these schools said to me : 

" We understand perfectly that business 
men must be trained by actual practice, but 
we do believe that a good theoretical training 
and the formation of proper habits of 
thought will prepare a man to learn quicker 
and more thoroughly all practical work. 
From the experience that I have had, I be- 
lieve that such an education will make him 

435 



Business and Education 

at the age of twenty-five more advanced in 
his special Hne of business and better quali- 
fied to handle it than he otherwise would 
have been at the age of thirty. Our stu- 
dents get a good deal of knowledge regard- 
ing political economy, law, languages, etc., 
but it is our highest claim that we give to our 
men the independent, exact, inquiring, re- 
searching spirit of German scientific workers 
at a time when they are young enough to 
apply this spirit with enthusiasm to the busi- 
ness in which they are engaged. That is the 
first thing we set out to teach — a habit of 
thinking which will combine general prin- 
ciples with exact knowledge of details. 

" There are two lines of instruction fol- 
lowed in the Handelshochschule, a general 
one of the old university fashion and a tech- 
nical one of new organization. The general 
instruction is of the highest university stand- 
ard, and is given by university men at 
Cologne, Frankfort, and Leipsic. Generally 
the students of the Handelshochschide are 
entitled to follow the same lectures as uni- 
versity students. The teachers of technical 
matters are new men in a new line, and are 
naturally not altogether satisfactory at the 
beginning. There is much difficulty in get- 
ting men with the proper training for the 
work which we want done, but I believe that 
we shall succeed in getting good faculties 
436 



Political Problems of Europe 

who can give thorough instruction in prac- 
tical business methods. 

" The technical lines of instruction in- 
clude accounting, correspondence, calcula- 
tions, and languages. I think American ac- 
counting methods are more advanced for the 
moment. We aim to teach thoroughly the 
mathematics involved in arbitrage and ex- 
change operations, and in connection with 
business finance and insurance. Most of 
the instruction is by lectures. * Learning by 
doing ' seems rather inadequate for the age 
of our men. 

" Lectures are being developed on the tech- 
nology of our chief industries, now partly 
done at Leipsic; on the history of some of 
the leading industrial and financial institu- 
tions, now partly done at Cologne; and on 
the practical handling of duties and tariffs of 
the world. In economics we endeavor to 
have every year lectures on money, banking, 
foreign trade, and the history of commerce 
and banking. All of these lectures, of course, 
are in addition to the regular lectures on 
theoretical and practical economics, gov- 
ernment finance, and statistics. You will 
find in these schools a tendency to be up to 
date in facts, and to care less for the details 
of historical development than most Ger- 
man economists do. But we have put it 
down as strict principle not to make any 

437 



Business and Education 

concessions in scientific methods and exact 
thought. We offer courses in commercial 
and corporation law and the laws relating 
to bills of exchange and bankruptcy. The 
courses in geography are particularly varied. 
They embrace not only cartographical facts, 
but also the chief products of different coun- 
tries, the transportation systems, etc. We 
take the students on excursions to see inter- 
esting plants. At Cologne an arrangement 
has been made to haA'e a series of short lec- 
tures by business men and secretaries of in- 
dustrial corporations. 

^' The ordinary course which we favor ex- 
tends over two years, and presupposes a 
sound preparatory education. A new habit 
of thinking and a fund of useful knowledge 
— that is v/hat we aim to give with our teach- 
ing. The future of the nation depends on 
men. ]\Ien are the greatest economical force. 
The business life of to-day is too complicated 
to allow the old-fashioned apprenticeship, 
with its uncontrolled routine, to form the 
future leaders. The extension of business 
relations and the development of the great 
industrial organizations demand a new sys- 
tem of commercial education. We endeavor 
to teach what those young men who expect 
to be commercial leaders will need, and we 
are fully convinced of the importance of this 
field of instruction." 

438 



Political Problems of Europe 

The Emperor, whose clear vision per- 
ceives the beneficial influence of industrial- 
ism on the national strength, employing the 
increase in population at home, instead of 
forcing it to emigrate, and by so employing 
it adding enormously tO' the income of the 
nation, is sometimes obliged to make an 
almost furtive recognition of the new princes 
of the empire so that he may avoid offending 
prejudices of the old aristocracy. Thus an 
intimation was conveyed to the American 
ambassador in Berlin before the Emperor 
dined with him in February that his Majesty 
would like to have among the guests Herr 
Rathenau, of the Allgemeine Electricitats 
Gesellschaft, the great electrical company of 
Germany; Herr Ballin, of the Hamburg- 
American Line ; and Herr Wiegand, of the 
North German Lloyd. His Majesty desired 
to talk with them about their far-reaching 
enterprises, each employing an army corps 
in German industrial conquests overseas. 
The court circular issued to the press omitted 
mention of these gentlemen having been 
present. The annual emigration from Ger- 
many since the present Emperor began to 
reign has declined, roughly, from a quarter 
of a million yearly to one-tenth of that num- 
ber. The population of Germany, increas- 
ing three quarters of a million a year, has so 
far been largely occupied at home, but a 

439 



Business and Education 

speculative problem long pressing on the 
attention of German statesmen is, how shall 
the surplus population be disposed of so that 
it may be retained as part of the national 
strength and not lose its identity in the 
United States or other new non-German 
countries? That problem has so far found 
a satisfactory practical solution in the ex- 
pansion of industry and the increased foreign 
trade. The pressure of population on the 
means of subsistence must increase, and wdll 
probably enable Germany to continue rela- 
tively a low-wage-paying country. The 
Government surely shows the highest wis- 
dom in shaping the educational system so that 
every citizen is trained to the greatest indus- 
trial or commercial efficiency, and taught to 
make the most of the rather meagre natural 
advantages which the German Empire 
possesses. 

The Emperor takes the greatest interest in 
the whole educational system, and particu- 
larly in the technical schools. He attends 
lectures occasionally at Charlottenburg, 
sometimes going there several times during 
the season. His interest manifested in this 
way has a marked influence. 

The educational system of Europe cannot 
be properly considered without taking into 
account the influence of the army. Prac- 
tically, every able-bodied man on the Con- 
440 



Political Problems of Europe 

tiiient of Europe has been moulded by this 
influence. The effect of the army training, 
coming as it does at a most impressionable 
age, is enormous, and is on the whole, I be- 
lieve, of great value. Much may be said 
about the great cost of the military estab- 
lishments of Europe, but there is undoubt- 
edly a large entry to be made on the other 
side of the ledger in the value of the army 
training to the young man. This is very 
generally recognized in Europe. Mothers 
part with their sons for the year or the two 
years of army experience with the very gen- 
eral belief that they will return benefited 
by that experience. The mind of the peas- 
ant boy receives its first great awakening in 
the army life. He travels and gains knowl- 
edge in many ways. In Italy and France 
particularly, the army is used as a means of 
bringing people from various parts of the 
country into contact with each other. Men 
from the southern provinces are quartered 
in the north and the northern men are 
moved to the south, with the result that 
there is a far better national understanding 
on account of the years of army experience, 
and a distinct strengthening of national 
unity. 

Observation of the nature and effect of 
the various systems of education in vogue 
in Europe cannot but lead an American to 
441 



Business and Education 

the conclusion that pre-eminence in industrial 
and commercial life is becoming more and 
more closely related to pre-eminence in edu- 
cational facilities. Such observation would 
further convince one that more emphasis has 
been placed on trade and technical schools 
in Germany than is the case with us. We 
may have little to learn from the educational 
systems of other countries than Germany, 
but from the standpoint of an effective aid 
to industry and commerce the German sys- 
tem presents points of superiorit}^ We need 
more trade schools, more technical schools, 
and far better equipped institutions for 
higher commercial education. We are turn- 
ing out quite enough men who attempt to 
make a living as lawyers and doctors. With 
great advantages we could shift some of that 
energy into other channels. If we build 
schools where every boy who is at work at 
a trade can learn, under competent masters, 
the scientific and technical side of his work, 
we shall have done something of vast impor- 
tance for the development of national great- 
ness. If we organize a system of higher 
commercial education which will give as 
superior equipment to our business men as 
our great institutions of technology now 
give to our engineers, we shall have done 
much to give permanence and world scope 
to our commerce. Until we have done all 
442 



Political Problems of Europe 

that we shall have shown ourselves less 
awake than is the German nation to the aid 
which education can give to industry and 
commerce. 



V. Paternalism and Nationalism 

In any examination of European political 
and economic institutions, the attention of an 
American would at once be attracted to the 
subject of workingmen's insurance. He 
would find it a subject not only of great 
importance in European political and social 
life, but one presenting to him novel consid- 
erations, because the institution is practically 
without parallel of any sort in this country. 
Nothing that I have seen in Europe has in- 
terested me more than the effect of working- 
men's insurance. On the Continent one 
finds it, measured from any point of view, 
one of the most important subjects that is 
presented in the whole array of affairs. As 
a rule, I think Americans have little concep- 
tion of the extent to which the system has 
developed, and of the marked effect which 
it is producing upon national economy and 
upon social conditions. 

Workingmen's insurance conducted as a 
government, or semigovernment institution, 
is confined to the Continent. In Great Bri- 
tain there is no government activity in this 

443 



Business and Education 

field, the development there being wholly 
within the ranks of the friendly societies, or 
else in the direction of the provisions which 
are made by the great railway corporations 
for retiring on part pay their superannuated 
servants. The weight of political sentiment 
in Great Britain is violently opposed to the 
adoption by the Government of any position 
which might lead to national responsibility 
for workingmen's pensions. On the other 
hand, in the ranks of the workingmen, and 
particularly in organized labor, there is a 
growing disposition to force the question 
upon the attention of Parliament. 

It is on the Continent that we find the 
governmients intimately related to the sub- 
ject of workingmen's insurance. There has 
been an interesting development of semi- 
public semi-government insurance institu- 
tions in Germany, France, Italy, Austria- 
Hungary, Belgium, Sweden, and Denmark, 
and in all of those countries the movement 
has assumed proportions of political impor- 
tance, and the workings of the systems have 
already produced marked sociological effect. 

It is in Germany that there is to be found, 
by all odds, the highest evolution of work- 
ingmen's insurance. In that country a so- 
cial experiment has been conducted on a 
vast scale, and I think the movement may 
fairly be said to mark the most interesting 

444 



Political Problems of Europe 

recent social legislation that is to be found 
anywhere in the world. 

The significance of the movement in Ger- 
many will be better understood when it is 
noted that 17,000,000 German workmen are 
contributing to and enjoying the benefits of 
the pension system. That significance is em- 
phasized when we learn that since the in- 
ception of the system, in 1885, the total 
receipts have reached $1,750,000,000. At the 
present time the annual receipts are in ex- 
cess of $130,000,000, an amount sufficient 
to make us consider with much interest the 
economic consequences of the plan. 

Especially is it noteworthy to find that 
this vast sum has been administered with 
absolute integrity. The administration of 
the insurance funds of Germany offers one 
of the best indications in the world to-day 
of the possibility of a successful State con- 
trol of important institutions, even when 
enormous sums of money are involved. The 
demonstration, however, has more than in- 
tegrity to its credit. The collection and 
disbursement of these great funds have been 
carried on with an economy which is ad- 
mirable. In considering the cost of admin- 
istration of the German insurance funds it 
should be remembered that collections are 
made from 17,000,000 individuals, as well 
as from the employers of those individuals, 

445 



Business and Education 

and that in making disbursements, particu- 
larly of the sick and accident funds, there 
is a care and intelligent supervision exer- 
cised which must make the cost of disburse- 
ment quite as great as the cost of collection. 
There are, therefore, reasons for a much 
higher ratio of expenses than would be es- 
sential in such a system of life insurance as 
we have in America. But, as a matter of 
fact, the cost of Administration of American 
insurance funds makes sorry comparison 
with the expense of administration in Ger- 
many. It is a monument to the economy 
of the German administration to find that 
less than eight and one-half per cent of the 
total income is used up in the cost of ad- 
ministration, and that ninety-one and one- 
half per cent is paid out in benefits to the 
insured. A showing like this, so greatly in 
favor, apparently, of the economy of gov- 
ernment administration, would seem to raise 
the inquiry as to wdiether Germany has not 
found a better plan for the administration of 
insurance funds than we have evolved in this 
country. 

Nothing like a full consideration of the 
subject of workingmen's insurance is to be 
given in the space here available. I be- 
lieve it is a subject worthy of the deepest 
consideration. Certainly it is one that 
offers many difficulties before a clear con- 
446 



Political Problems of Europe 

elusion can be reaehed as to its effect and 
advisability. There are arguments of great 
weight on both sides of the subject. I be- 
lieve, however, that it is a subject which in 
due time will come before us in America for 
consideration and action. 

Any exposition of even the German sys- 
tem of insurance alone is too complicated 
to be presented in a brief study of the sub- 
ject. The system in Germany is an evolu- 
tion, and in its present form probably none 
of its friends would suggest that it is an 
ideal system. Anything like a complete un- 
derstanding of its provisions is complicated 
by the fact that there are three distinct 
forms of insurance — insurance against sick- 
ness, against accident, and insurance to pro- 
vide old-age pensions. An explanation of 
the system is further complicated by the 
fact that the administration of these three 
distinct and separate insurance funds is in 
many different hands, although all are un- 
der the supervision of the general Govern- 
ment. The sick insurance fund is admin- 
istered by more than 23,000 sick clubs. The 
accident insurance is administered by nearly 
five hundred managing boards, which repre- 
sent various State and municipal communi- 
ties and various trades and industries. The 
old-age pension system is in the hands of 
some thirty-one distinct insurance institu- 

447 



Business and Education 

tions. An understanding of the details of 
German insurance administration is, there- 
fore, difficuk; but some general considera- 
tions of its provisions and effects are easily 
possible. All the insurance funds are con- 
tributed to in about equal proportion by 
employers and by the insured, and that total 
is augmented by a subsidy from the Empire. 
Employers pay in about forty-seven per cent 
of the total, the workingmen less than forty- 
six per cent, while the subsidy from the Gov- 
ernment provides between seven per cent 
and eight per cent. 

The effect of the institution, as seen in 
Germany, is of far wider significance than 
are merely the admirable efforts in alleviat- 
ing distress caused by sickness, by accident, 
or by poverty in old age. The results which 
have been attained in the accident insurance 
field, for example, are far broader than the 
mere indemnification in some measure for 
the suffering and loss which accidents have 
entailed, and it is likewise true in the other 
branches that the provision which has been 
made for the payment of pensions in lieu of 
wages lost in case of sickness has been only 
a part, and one might say almost a minor 
part, of what has been accomplished in that 
field. 

The results of the German workingmen's 
insurance embrace considerations of the 

448 



Political Problems of Europe 

deepest sociological consequences, on the one 
hand, and of a most significant effect on the 
national health and physique, on the other. 
The Germans have gone at the whole subject 
with their characteristic thoroughness, and 
the whole world will in time be forced to 
give attention to what is being accomplished. 
The German system of workingmen's 
insurance is founded on a very general be- 
lief that the change which has been going 
on in Germany, transforming that country 
from an agricultural into an industrial State, 
and the evolution which has been proceeding 
in industry, resulting in a great specialization 
of work and the high development of the 
factory system, have made necessary an 
enunciation of some new principles in regard 
to the duty of the community toward the 
individual, principles which are fundamental 
in their character. The intricate and com- 
plicated modern system of industry has left 
the industrial population economically de- 
pendent, no matter how free it may be polit- 
ically, the Germans argue, and the develop- 
ment of that system has brought the indus- 
trial population into a position where it is 
difficult for the individual to extricate him- 
self from his misfortunes should he be over- 
taken by accident, sickness, or old age. In 
this new industrial order the liability to ac- 
cident is greatly increased, and new means 
29 449 



Business and Education 

for meeting the condition which that fact has 
brought about are demanded. 

Various nations have recognized the in- 
creased Habihty to accident which has come 
with the present-day development of indus- 
try, and have taken diverse means to meet 
the new condition. Germany offers the most 
notable example of a development of acci- 
dent insurance. France, on the other hand, 
has rnidertaken to meet the demands which 
industrial workers make for some adequate 
provision for indemnity by passing most 
rigid and far-reaching legislation, fixing 
upon the employer the liability and making 
provision so that the injured workingman 
may easily enforce that liability in the courts. 

In America there not only has been little 
legislation passed on this subject, based on 
broad principles of humanity, such as have 
actuated the German legislation, but there 
has been little progress toward more defi- 
nitely fixing the liability of the employer, 
and making it easy for the injured person 
to enforce a claim. Instead of that, there 
has arisen here a system of so-called em- 
ployers' liability insurance, which are in ef- 
fect organizations of strength with which to 
combat weakness, organizations the object 
of which is not to indemnify the worker for 
injuries, but rather to indemnify the em- 
ployer for the cost of fighting in the courts 

45° 



Political Problems of Europe 

the claims of the injured persons. The pur- 
pose of this system is not to put the insurance 
company in the position of a fair employer 
who will make payment of a just indemnity. 
Its purpose is accomplished rather by fight- 
ing each individual case with all the skill 
which its organization, made up of experi- 
enced adjusters and sharp attorneys, en- 
ables it to pit against the feeble efforts of an 
injured workingman who is attempting to 
enforce even the inadequate legal rights that 
our legislation has thus far accorded him. 
If statistics were presented dividing the re- 
ceipts of these insurance organizations so as 
to show what amount they expended in actu- 
ally paying indemnity to injured persons, 
and what amount they used in fighting 
claims and paying dividends, the comparison 
which those figures would make with the 
humane institution of accident insurance as 
developed in Germany would be anything 
but to our credit. 

Germany has accomplished most admir- 
able results in the way of providing indem- 
nity to persons injured in industrial occupa- 
tions. The work accomplished by accident 
insurance, however, has been of far wider 
usefulness. Accident insurance as devel- 
oped in Germany has really been an insur- 
ance against accident, not merely the pro- 
viding of indemnity. There has been evolved 

451 



Business and Education 

there, as a result of the study which em- 
ployers and employees who have been man- 
aging these insurance funds have given to 
the subject, a system of laws and of reg- 
ulations providing for safeguards which have 
gone far to reduce the number of accidents, 
and to remove the danger from industrial 
callings. In the last few years the effect of 
these safeguards has been to reduce one-half 
the frequency of accidents. Viewed from an 
economic standpoint alone the saving which 
has resulted to the national economy has 
been a vast sum. In the United States we 
seem as extravagant of life as of resources. 
There is no single line in our national statis- 
tics that is read in Europe with such start- 
ling surprise as the one which shows 60,000 
fatalities and injuries on our railroads in a 
single year. In other industrial fields we 
are as careless of life. It seems to be re- 
garded as more economical to fight damage 
suits than to provide safeguards, and dan- 
gers that do not interfere with dividends fre- 
quently receive little attention. 

It is noteworthy that German employers 
have willingly accepted the burden they are 
charged w^ith on account of workingmen's 
insurance. That it is a very considerable 
burden there is no denying. The Krupp 
Steel Works alone, for example, contrib- 
uted more than $2,000,000 for the purposes 
452 



Political Problems of Europe 

of workingmen's insurance within the period 
from 1885 to 1902. The amount which 
employers are paying, compared with the 
total wages paid, is showing increases as the 
operations are extended in the various fields 
of insurance. The actual contributions to 
the insurance fund have, too, been only part 
of the expenses that the administration of 
the insurance laws has charged the employ- 
ers with, because they have been forced to 
spend great sums of money for providing 
safeguards against accident, and putting 
their works in the best possible hygienic con- 
dition. The general disposition among em- 
ployers, so far as I have observed, however, 
is to regard these expenditures as having 
been made with good value received, because 
of the increased efficiency and better health 
of their workmen, and their contentment 
and fair attitude toward capital. 

There have been almost as great indirect 
benefits connected with the administration 
of the sick insurance fund as has been the 
case in the field of accident insurance. Re- 
markable results have been attained in the 
prevention of the spread and in the cure of 
contagious diseases. The sick insurance 
administration has by no means stopped 
at the point of giving care and financial aid 
in cases of sickness. More and more its 
aim has been to seek, with the utmost en- 

453 



Business and Education 

ergy, every means for avoiding the disturb- 
ance in the wage-earning capacity of the 
workingmen which sickness entails. It has 
sought to ascertain the principal causes of 
sickness, and to combat with organized and 
scientific efforts the various enemies of pub- 
lic health. The organs of the workingmen's 
insurance committees have done a great 
work in educating the people in hygiene, 
and particularly in reducing the scourge of 
pulmonary diseases. This has been clone 
through prompt and effective measures of 
isolation and treatment, and in directing 
special attention to the question of the hy- 
giene of workingmen's dwellings. The ad- 
ministration of the sick insurance, instead of 
being confined to rendering assistance to the 
sick and the invalid, has sought to cure them, 
and make them fully capable again of earn- 
ing their former livelihood. In the develop- 
ment of that work the Germans have 
characteristically gone to the very founda- 
tion of the question, and are doing as im- 
portant service in effectively preventing 
sickness as they are in curing it or relieving 
the distress which follows from it. 

The effect upon the general level of the 
national health has been enormous. In the 
field of hygiene, as in the field of educa- 
tion, the German Government seeks to make 
of each individual the most effective eco- 

454 



Political Problems of Europe 

nomic unit it is possible to develop. In 
doing that, the aid which has been rendered 
by the direct and indirect results of work- 
ingmen's insurance in improving the physi- 
cal condition and increasing the power of 
resistance to diseases, and in promoting the 
recovery and full return to health of those 
who are ill, has been beyond all calculation. 

There is one phase of the benefits which 
workingmen's insurance in Germany has 
conferred that is not to be measured by 
statistics nor weighed with exactness by 
definite evidence, but it is, nevertheless, one 
of the most noteworthy of all the influences 
that have grown out of this great social ex- 
periment. There has been accomplished a 
service of the very first importance in the 
direction of bringing about more harmoni- 
ous relations between employers and em- 
ployees. There is growing to be a better 
and better mutual understanding between 
capital and labor, and the administration 
of these insurance funds has furnished a 
common ground upon which the two inter- 
ests can meet and discuss those questions 
which affect both. The committees that 
have the administration of all the details of 
the collection and expenditure of these great 
funds are made up in part of employers and 
in part of workingmen. In serving on these 
committees, employers are brought to a 

455 



Business and Education 

better understanding of and a closer sympa- 
thy Avith their employees, and workingmen 
have been given a clearer comprehension of 
economic possibilities in the field of indus- 
try, and have come better to understand their 
employers' point of view. I do not mean to 
say that Germany has reached a millennium, 
and that there is complete harmony and 
understanding between capital and labor 
there, but I do feel that the labor situation 
offers some sharp contrasts to conditions in 
other countries, and that those contrasts are 
favorable to Germany. I have frequently 
spoken of the spirit which pervades so many 
of the institutions of Germany, the spirit of 
making each individual member of the com- 
monwealth the most efficient of industrial 
and economic units. That spirit has accom- 
plished tremendous industrial results. With 
an educated brain and a well-developed phy- 
sique, the German workingman is equipped 
to secure good results, and when there is 
added to that equipment a spirit which allows 
him to use his faculties to the fullest extent, 
he makes strikingly favorable contrast to the 
English trades-unionist, Avith his ca'-canny 
proclivities, and, indeed, to some of our 
own labor union members. Avho. Avorking 
under the arbitrary rules Avhich their unions 
haA^e laid doAvn, giA^e for a day's Avages not 
the most Avork they can do, but the least. 

45^ 



Political Problems of Europe 

The tendency on the Continent has for 
a number of years been in the direction of 
higher customs tariffs. That tendency has 
underlying it broad influences. The first 
and obvious one is the ever-increasing ne- 
cessity for added revenues; for the history 
of the budgets of nearly every European 
country is a story of more rapid growth in 
expenditures than those countries can show 
in the totals measuring any other phase of 
their development. Finance ministers have, 
with hardly an exception, been under the 
greatest pressure in order to balance the 
budget; and they have therefore welcomed 
the growing spirit of nationalism which has 
permitted them to lay higher and higher 
duties on the products of foreign countries. 
One of the most general characteristics of 
European development in the present gen- 
eration has been this growth of nationalism 
— this intensifying of the patriotic spirit — 
which has demanded at any sacrifice the de- 
velopment of national resources. 

Germany has, of course, exhibited this 
spirit of nationalism in its most intense 
form, but it has been the keynote of the 
political life throughout Europe, and is in 
sharp contrast with the spirit of unity and 
universal fraternity which earlier in the cen- 
tury became, for a time, the dominant note. 

This development of nationalism has fos- 

457 



Business and Education 

tered a belief in the value of a protective 
tariff, and that belief has been greatly 
strengthened by the outlook which all of the 
European countries have had on the un- 
exampled development of the United States 
under the influence of protection. In Ger- 
many, the necessities of the Agrarians nat- 
urally made them strongly in favor of 
protection for the products of the land ; while 
the rise of industrialism built up a party 
representing the manufacturing interests, 
the members of which were as keen as the 
Agrarians for protection, although they 
fought the advance of duties which meant 
dearer food at the same time that they were 
using every effort to have a tariff schedule 
enforced which would protect them against 
the products of foreign workshops. An- 
other influence in Germany has been the 
Kaiser's intense desire to build up a navy, 
and the necessity for raising great revenues 
for that purpose. The history of the tariff 
in Germany has been practically a succes- 
sion of legislative measures increasing cus- 
toms duties ; and while these measures have 
been fought with great bitterness by the 
industrial population, and particularly by the 
Social Democrats, the several influences 
favorable to an advance in the tariff have 
been almost uniformly effective, and the 
tariff which a year ago was successfully put 

458 



Political Problems of Europe 

through the Reichstag and is now awaiting 
the conclusion of commercial treaties before 
its general application by the executive de- 
partments is the highest which any Euro- 
pean country has yet undertaken to put in 
force. 

In France there have been few changes 
in the tariffs for many years, but the senti- 
ment is overwhelmingly in favor of protec- 
tion, and there is no important opposition to 
the high duties that are in force. In addi- 
tion to the high protective duties, there has, 
indeed, been much special legislation in 
France, which is of a character to put diffi- 
culties in the way of the importation of 
foreign products and to make the domestic 
market more secure to home manufacturers. 
This special legislation is in the nature of 
clauses inserted in public franchises, which 
provide that the public utilities built under 
these franchises must be constructed wholly 
from material produced in France. This 
is a common provision in franchises for elec- 
tric roads and gas and electric lighting 
plants. 

That same spirit is notably strong in Rus- 
sia, where it has been decreed that all rail- 
road construction must be carried on with 
rails from Russian mills, and, generally, that 
every sort of material used in the building 
of railroads must be of Russian origin. This 

459 



Business and Education 

was the economic rock that Minister Witte 
steered against, and with anything but 
pleasant results. M. Witte was the strong- 
est of protectionists. He not only believed 
in high protective duties against almost all 
foreign importations, but he encouraged the 
Czar to sign ukases which practically pro- 
hibited the importation of foreign material 
for use in public works, and particularly in 
railroad construction. The result of that 
policy was, temporarily, most encouraging. 
Foreign capital, recognizing the vast require- 
ments which the development of M. Witte's 
plans in regard to the Russian railway sys- 
tem contemplated, was induced to construct 
factories on an extensive scale. The disaster 
which came to nearly all of these enterprises 
was by no means, however, entirely attribu- 
table to faults in M. Witte's economic pro- 
gramme. French and Belgian promoters in- 
duced small capitalists to make, in the 
aggregate, huge investments in these enter- 
prises, but in many cases the promoters had 
no thought beyond reaping the largest pos- 
sible profit from the stock subscriptions. 
There were companies organized which 
never got further than a point where the 
promoters divided the spoils. 

The size of Russia and the lack of public 
knowledge regarding conditions there made 
an ideal field in which promoters could weave 
460 



Political Problems of Europe 

fairy tales regarding* prospective profits, and 
the catch of gudgeons was one of the richest 
that has ever been known. There were, 
however, many legitimate enterprises, and, 
unfortunately, some of these at the end did 
not fare much better for the investors than 
those where the promoters never took the 
trouble even to construct the factories for 
which they raised the capital. So long as 
railroad building went forward rapidly and 
the Government could afford to pay the 
extremely high prices which the domestic 
market commanded, the legitimate manu- 
facturing enterprises thrived; but when 
the development of new public works slack- 
ened the factories were left without orders. 
Conditions were far from parallel with 
those during the early industrial develop- 
ment of the United States, and that, per- 
haps, was one of the miscalculations that 
M. Witte made. The Russian peasant 
population is, of course, in no wise to 
be compared with the population in this 
country, and the domestic demand for the 
products of these manufacturers — once 
the Government orders failed — was prac- 
tically nothing. Statistics of Russia's vast- 
ness are in some ways most deceiving. It is 
true that there is a population of one hun- 
dred and forty millions ; but if that popula- 
tion could be measured by some comparative 
461 



Business and Education 

economic unit, so that its productive and 
consumptive capacity were compared with 
such individual capacity in the United States, 
for instance, the real economic value of that 
great population would dwindle in a most 
surprising way. Any one who has seen Rus- 
sian peasant life in the " mir," any one who 
has seen the shelters which are called houses, 
looked upon the decoction of black bread and 
cabbage which, with an occasional supple- 
ment of vodka, forms the usual food of the 
vast population, will understand what a 
small economic value must be put on each 
unit of Russian population ; and that makes 
it easy to understand the complete stagnation 
which fell upon Russia's new industries, 
which had grown up under the intense stimu- 
lus of a prohibitive protection and were 
then left stranded by the stoppage of Govern- 
ment orders. 

Trade in Europe has not only the national 
difficulty of tariff walls to surmount, but the 
free interchange of commodities is greatly 
interfered with by the octroi duties. This 
form of taxation is general in France and 
Italy, and is found to some extent in Swit- 
zerland, and has a most pronounced effect 
upon industrial development. The tendency 
is toward abolishing this interference with 
trade, and in several of the cities of France 
the octroi has been done away with. It is 
462 



Political Problems of Europe 

still in force in Paris, as every one who has 
even crossed the city lines in an automobile, 
and had his tank of gasoline measured when 
he went out and when he came back, will 
remember. 

Italy is a land of high tariffs and of se- 
verely enforced taxes, but in some sections 
there is being shown a growing liberalism 
in the administration of her customs affairs. 
That country has adopted from us the 
bonded-warehouse idea, and has expanded 
it considerably further than we have. There 
are being established in Italy what are 
known as free customs zones. These zones 
are merely bonded customs warehouses on 
a large scale. They are zones into which 
goods may be freely imported, manufac- 
tured and re-exported, the manufacturers 
being permitted to erect the necessary build- 
ings and given almost complete exemption 
from custom-house formalities so far as the 
goods manufactured there are re-exported 
to foreign countries. All food consumed 
within these zones must pay the customs 
duties. Such a zone has been established in 
Genoa, and it is proposed to develop in other 
seaports — especially in the North — simi- 
lar free zone systems. Manufacturers in the 
interior whose foreign business is interfered 
with by this plan are naturally found in op- 
position to it, but it promises to be success- 

463 



Business and Education 

ful and to add to the rapidly growing in- 
dustrial importance of northern Italy. 

Not many people in the United States are 
fully aware of how rapidly Italy is advanc- 
ing in industrial importance. In some ways 
northern Italy has, in the last ten years, 
shown as promising development in an in- 
dustrial way as is to be found anywhere in 
Europe. Italian industry has always been 
handicapped by lack of fuel. It has been 
difficult to compete in the world's markets, 
when power had to be obtained from fuel 
imported from England ; but in the last few 
years Italy has been rapidly developing the 
use of the " white coal " from the peaks of 
the Alps and the Apennines. The never- 
failing water supply of the snow-topped 
mountains is being utilized by the electrical 
engineers in a way which promises to con- 
vert northern Italy into a great industrial 
state. Nowhere in Europe is there a popula- 
tion better fitted to aid in an industrial de- 
velopment. The people are dexterous, quick 
to learn, and industrious, and up to the 
present time the general wage scale com- 
pares favorably with that of any competitors 
which they have to meet. The result of 
these favorable conditions has been, for in- 
stance, the development of the silk industry 
at a rate which sounds like statistics of Amer- 
ican industrial growth. 
464 



Political Problems of Europe 

In the last few years there has been more 
or less agitation in Europe over the proposal, 
which had its origin in Austria, for the for- 
mation of a European customs union, a plan 
aimed particularly at the United States. The 
difficulties in the way are recognized by most 
statesmen as insurmountable, but the idea 
is a dream in the minds of some who harbor 
particular antagonism toward the growth of 
our commercial interests. European states- 
men had at one time high hopes that the 
United States would agree to a series of 
reciprocity treaties. Seventeen of these 
reciprocity measures were successfully nego- 
tiated with foreign countries and have now 
been before Congress for two years or more. 
There seems to be not the slightest prospect 
of their ratification, nor is there any grow- 
ing disposition favorable to them. These 
treaties would be of immense importance to 
us, as well as to the European nations con- 
cerned; but in every case the reduction in 
the tariff on goods which would be imported 
and which would, to some extent, come into 
competition with goods manufactured in a 
small way in this country, has led Senators 
— who broadly favor the reciprocity prin- 
ciple — to protest most vigorously against 
the specific possibility of injuring some pet 
industry in their respective States. 

The treaty which was negotiated with 
30 465 



Business and Education 

France was regarded by Secretary Hay and 
the Hon. John A. Kasson, who assisted in 
its preparation, as the most favorable to the 
United States of all the treaties with the 
leading nations of Europe, and it was trans- 
mitted to the Senate, backed by all the in- 
fluence at the command of the Department 
of State, with the view of making a test of 
whether the Senate would ratify any reci- 
procity treaty. The treaty provided for a 
slight reduction in the tariff on knit goods 
brought into this country from France, and 
the result of that was that a Senator from 
one of the New England states was pre- 
pared to go to any length to defeat the treaty 
because it was regarded unfavorably by 
small manufacturers in his state. He went 
to other members of the Senate who, while 
not especially interested in the French treaty, 
were opposed to the ratification of the treaty 
with Germany, perhaps, and made trades 
by which they would mutually assist each 
other in defeating all of the treaties. The 
State Department is now completely dis- 
couraged and the disposition is to make no 
further attempt to negotiate reciprocity trea- 
ties. This has been particularly annoying 
to the Germans, who have come pretty gen- 
erally to believe that the United States has 
purposely and maliciously discriminated 
against German goods. There is probably 
466 



Political Problems of Europe 

no ground for this opinion, but it is firmly 
fixed in the minds of many Germans, and 
accounts, in some measure at least, for the 
hostility that the administrators of the Ger- 
man tariff have shown to our meats and 
other products. 

The Germans have a rather more scien- 
tific plan for preparing a customs tariff than 
we have. There is no such " lobbying " with 
the Reichstag as we see in Washington ; no 
such pressure brought by various manufac- 
turing interests against individual members, 
as is the case with us. There is a system of 
Boards of Trade in Germany which com- 
pletely covers the country, and which forms 
a medium of communication between the 
commercial interests and the legislative 
body. These Boards of Trade are semi- 
public in character; and when a measure 
such as the tariff is under discussion the 
opinions of individuals and the pressure of 
interests reach the Reichstag in the main 
through the medium of the Boards of Trade, 
and after having been carefully sifted by 
those representatives of all commercial 
interests. 

While the Governments of Europe do 
much to hamper the free movement of com- 
merce by their customs tariffs, they have, 
on the other hand, done much to foster it 
by the care which they have given to the 
467 



Business and Education 

development of transportation facilities. 
The railroads, to a greater or less degree, 
are controlled by the state in nearly all of 
the Continental countries, and the tendency 
on the Continent is distinctl}^ in the direc- 
tion of more complete government control. 
Switzerland, by the Referendum, has re- 
cently decided to purchase all of the rail- 
roads in the countr}^; Italy is contemplating 
an extension of the state's activities in the 
field of transportation ; in Germany there is 
no longer any debate as to the advisabilit}^ of 
the state's control of the lines of transporta- 
tion, and there the state is being led into 
almost communistic fields. The Govern- 
ment's interest as a consumer of fuel, in 
connection with the operation of the rail- 
roads, and the difficulties which it met with 
at the hands of the coal syndicate, has led it 
into purchasing coal mines which are to be 
operated by the state ; an experiment which 
pleases the Socialists and which, if success- 
ful, may be followed by others of the same 
character. 

In England alone, of the European coun- 
tries, the tendency is distinctly away from 
the state management of transportation fa- 
cilities. England has had more experience 
than any other country with the municipal 
control of public utilities, and, on the whole, 
the experience has not been satisfactory. 
468 



Political Problems of Europe 

English taxes in some instances have been 
increased enormously on account of indus- 
trial undertakings by municipalities, and the 
result is a revulsion of feeling on the part of 
a great mass of the English voters. The 
English railroads have always been con- 
trolled by privately managed corporations 
organized for that purpose, but they do not 
show the superiority, as compared with the 
state-controlled roads of the Continent, 
which might be expected. English railroad 
managers are beginning to- wake up a little ; 
but, compared with the men who manage 
our own railroad properties, they are un- 
questionably deficient in practical knowledge, 
and they make a very sorry contrast so far 
as intensity of application is concerned. The 
English roadbeds are thoroughly well built, 
and the English passenger trains are able to 
make time which compare favorably with 
the rate of railroad travel in any other coun- 
try ; but when it comes to handling freight, 
some of the statistics of the English rail- 
roads are ludicrous. 

A friend of mine was standing on the 
towering deck of the Cedric last summer 
when she came alongside the dock at Liver- 
pool. By his side was a huge Californian 
who was making his first European trip and 
was full of curiosity. He looked far down 
from the upper deck to the little train of 
469 



Business and Education 

coaches that was waiting to carry the pas- 
sengers up to London, and asked what they 
might be. He was told that it was the spe- 
cial train to London. 

" Do people travel in those things here? " 
the big Calif ornian said. " Why, when I 
was a boy, I used to play with trains like 
that." 

The comparison was not inapt. As late 
as the year 1900, the average freight-train 
load in England was but fifty tons; that is 
to say, the average train-load was only equal 
to the capacity of one of our modern freight 
cars. There has been some improvement 
since then, and there is now a marked tend- 
ency toward heavier equipment, but it all 
seems like toy equipment when compared 
with our own heavy trains. 

The various problems of transportation 
by land and w^ater form one of the most 
important groups of political questions 
throughout the Continent. In Austria. Ger- 
many, France, and Belgium there are few 
more important political matters current 
than those affecting transportation. In each 
of those countries there are most compre- 
hensive plans in hand for the development of 
the canal network, and each nation is pre- 
pared to spend great sums of money in per- 
fecting its canal system. 

While the famous Kiel Canal was in- 
470 



Political Problems of Europe 

tended primarily for strategic purposes, for 
enabling the German navy to pass easily 
from the Baltic to the North Sea and vice 
versa in time of war, the economic impor- 
tance of this waterway has grown from year 
to year and has given a strong impulse to 
canal building in Germany. In 1899 the 
Dortmund-Ems Canal, connecting the great 
iron and coal district of western Germany 
with the North Sea, was opened ; and its 
traffic has developed rapidly. It has given 
the coal industry access to Bremen, Ham- 
burg, and other North Sea ports; and the 
iron furnaces in the west have found it of 
the greatest importance to them for bringing 
in supplies of Swedish ores. In the summer 
of 1 90 1 the Elbe-Trave Canal, a large water- 
way connecting the Elbe with the Baltic at 
Liibeck, was opened. Its importance con- 
sists in supplying a cheap line of communi- 
cation between the many manufacturing 
cities along the Elbe and its branches and all 
domestic and foreign ports on the Baltic. 
At Berlin the Teltow Canal will be com- 
pleted this year. It connects the Spree above 
the city with the Havel near Potsdam, and 
has its raison d'etre in facilitating through 
traffic and transforming a number of Ber- 
lin's suburbs into manufacturing villages. 
These last three canals are capable of accom- 
modating vessels of from 600 to 800 tons, 
471 



Business and Education 

and are thus a wide departure from the old 
canals inherited from an earlier generation. 

The most important canals now projected 
or under discussion are the so-called Mid- 
land Canal, to connect the Rhine and the 
Elbe; the enlargement of existing canals; 
and a large new canal, replacing the present 
antiquated one, between Berlin and Stettin. 

Of all these projects by far the most im- 
portant and at the same time most promising 
is the Midland, or Rhine-Elbe Canal. It has 
been under discussion for about ten years. 
Not until 1899, however, did it take definite 
shape as a legislative proposition. At that 
time a bill for its construction was intro- 
duced into the Prussian Diet and occasioned 
one of the liveliest political struggles that 
Germany has had for a decade. 

The chief argument for the canal was, of 
course, that it would give cheap transporta- 
tion from the great coal and iron centres of 
the Rhine-Westphalian country, to all of 
northeastern Germany. The railways had 
reached the limit of their freight-carrying 
capacity, and the building of new ones would 
be very expensive through the highly devel- 
oped country traversed by them. The canal, 
however, met with the stoutest, most deter- 
mined opposition from the powerful Agra- 
rian element in the Diet. Their chief argu- 
ments against it were two : first, its great 
472 



Political Prohlems of Europe 

cost, and second, — what they pressed still 
more earnestly, — the possibility that it 
would facilitate the importation of foreign 
grain into parts of Germany not now acces- 
sible to the foreign shippers. These were 
their ostensible arguments; a stiU more 
powerful one was not mentioned aloud in 
the debates : the conviction that the canal 
would promote the development of. the man- 
ufacturing and commercial interests of the 
countr}^ and must inevitably tend toward in- 
creasing the political and social influence of 
the population engaged in those pursuits, 
while the power and influence of the Agra- 
rian and aristocratic classes must necessarily 
be diminished. 

The first canal bill was thus voted down, 
after its enemies had come forward with 
many other schemes of a more or less local 
character, which they sought to have incor- 
porated into it as '' compensations " to their 
localities for whatever damage the great 
canal might inflict upon them. Neverthe- 
less, the Government did not give up its 
plan. Herr Thielen, at that time Prussian 
Minister of Public Works, announced la- 
conically : " Built it shall be, for all that " ; 
and this '' gebaut wird er dock " has become 
a part of the political jargon of the time. 

After waiting two years the Government 
again came forward with its canal bill, but 

473 



Business and Education 

with great additions to it. Xot only was the 
Midland Canal provided for, but also the 
eastern connections and river improvements 
mentioned above. The Government had 
adopted the policy of giving '' compensa- 
tions " ; but even that did not placate the 
Agrarians. They were about to pass an 
emasculated bill — taking the eastern im- 
provements, so as to get their agricultural 
produce shipped cheaply to Berlin and other 
markets, but killing the ^Midland Canal en- 
tirely — when the Government, in May, 
1 90 1, put an end to the wrangle by with- 
drawing its billand proroguing the Diet. 

Last year another canal bill was intro- 
duced in the Diet. This provided only for 
an instalment of the ^Midland Canal, namely, 
from Bevergern to Hanover, and for the 
eastern improvements already described. The 
Government is evidently on the down-grade 
in the matter of making concessions to the 
Agrarians. Its plea for the passage of the 
original canal bill of 1899 had been based 
partly on military considerations, like facili- 
tating the transportation of supplies and 
munitions of war to the west — France is, 
of course, assumed to be the foe — but now 
the Government throws away this argument, 
and is willing to take a truncated canal, 
which of itself would be of minor importance. 
It is evidently speculating, however, upon 

474 



Political Problems of Europe 

more favorable political conditions in future 
for completing the canal. 

France is keenly interested in a compre- 
hensive project for perfecting its canal sys- 
tem. The French Chamber has voted credits 
of one hundred and fifty million francs 
which will be spent in the next few years in 
repairing and enlarging the present canals; 
and, in addition, nearly five hundred million 
francs for the completion of new canals. 
One half of the funds is to be supplied by 
the General Government and the other half 
must be provided by the district benefited. 
The plans are part of a general project for 
making a system of waterways throughout 
France by which goods can be carried unin- 
terruptedly from Basle and the Rhine to 
Orleans, Paris, and the seaports. 

Freight and passenger rates on the rail- 
ways in Prussia give occasion for lively dis- 
cussion. For some years the great manufac- 
turers have been actively working for a 
reduction of freight rates on the state rail- 
ways. The)^ used the schedule of low rates 
prevailing on the American roads as one of 
their best arguments, and they emphasize 
the great advantage that those rates give 
American exporters in the world's markets 
as an obvious reason for a reduction of the 
German rates. 

When the Prussian Finance Minister, 

475 



Business and Education 

Baron von Rheinbaben, was in America, he 
gave close attention to railway matters, and 
in recent debates in the Prussian Chamber 
he gave some interesting results of his com- 
parison of American and Prussian railway 
conditions. 

The state roads in Prussia, Baron von 
Rheinbaben argued, are compelled to charge 
higher freight rates than American roads, 
because, in the first place, the initial cost of 
the German roads was much greater than 
the American; and, in the second place, the 
American roads have a much greater vol- 
ume of freight to move in bulk than do the 
Prussian railways, and they also have the 
further advantage of a much longer average 
haul. He found that the American roads 
cost to build, on an average, about sixty 
thousand dollars a mile, while in Germany 
the cost of railroad building — owing chiefly 
to the higher price for the right-of-way — 
was nearly one hundred thousand dollars a 
mile. Baron von Rheinbaben gave it as his 
opinion that the present freight rates in 
America were largely the result of reckless 
rate wars, and that these rate wars had had 
such a disastrous effect upon earnings that 
the average return upon all American rail- 
way investments is less than two per cent. 
Where there is no competition he claims that 
rates are fully as high in the United States 
476 



Political Problems of Europe 

as in Germany, and he also asserted that the 
comparison was also not unfavorable to Ger- 
many when the freight rates on all goods 
of the higher classes were compared. It was 
only on low-grade bulky shipments, which 
could be carried a long distance without 
breaking bulk, that he found the rates per 
ton per mile distinctly lower than in Ger- 
many. He also claimed that the American 
roads made up, in some measure at least, 
for their lower freight rates by charging 
higher rates for their passenger traffic, and 
he made comparisons which were favorable 
to the German passenger schedule. 

The argument of the German commercial 
interests for lower rates in order to assist 
manufacturers in their export business and 
aid them in their battle for a foothold in the 
outside markets has caused some marked 
modifications in the tariff on goods for ex- 
port. It is, of course, quite impossible for 
the Government to satisfy the commercial 
interests in the matter of rates, and the report 
of every Chamber of Commerce throughout 
the empire annually devotes some pages to 
arguments and recommendations for further 
reductions. 

Not all of the roads in Germany are under 
state control, but it seems not improbable 
that the state will eventually operate all of 
the lines. No charters are given for the 

477 



Business and Education 

building of roads by private enterprise that 
do not contain the proviso that they may be 
acquired by the state after a given number 
of years. 

While we are inclined to criticise English 
railroads with much freedom, they have a 
record in one respect which our own railroad 
managers must look upon with respect. The 
gross earnings of the English roads never 
showed an unfavorable fluctuation, as com- 
pared with a previous year, of over one and 
one-half per cent. With all the talk of poor 
railway management, of decadent industries, 
and of the economic evils of war, it is con- 
fusing to find that the commercial develop- 
ment of Great Britain, measured by her 
gross railroad traffic, presents an almost 
unbroken record of advance. Net earnings, 
however, have been badly cut into by the 
rise in wages and by the higher cost of fuel. 



478 



THE CURRENCY 

An address delivered before the New York State 
Bankers' Association, July 5, 1906. 

A COMFORTABLE man is apt to be an opti- 
mist. A^ prosperous man is naturally averse 
to changes. Such a man is likely to be well 
satisfied with conditions as they exist. He 
looks with scepticism upon suggestions that 
would tend to bring into the situation new 
factors or new conditions. Bankers as a 
rule are regarded as typically comfortable 
and prosperous citizens, and perhaps it is 
small wonder that they are slow to recog- 
nize serious defects in the conditions sur- 
rounding them. At least, it is a fact that 
in the history of American finance, unless 
spurred to action by some great and imme- 
diate necessity, there has rarely been a time 
when bankers have given effective consider- 
ation to questions of banking or currency. 

There are in our laws few important 
enactments in relation to money that have 
not followed, and in large measure been the 
outgrowth of, some financial calamity. The 
Bank of the United States was rechartered 
as a result of the monetary chaos in which 
the country found itself at the end of the 

479 



Business and Education 

War of 1 8 12. The existing Sub-Treasury 
system was devised because state banks 
allowed their notes so to depreciate that the 
banks became unsafe depositories for public 
funds. The Civil War was responsible for the 
greenback and for the national bank note. 

In financial legislation we have been op- 
portunists. We have rarely done anything 
until forced to do it by misfortune. It is not 
that we have been extraordinarily conserva- 
tive, but rather that we have been inactive 
whenever conditions permitted us to remain 
inactive. If financial depression or panic 
pressed us to a point where legislation became 
imperative, we then legislated with more 
haste than wisdom. 

It is an easy and natural thing for a banker 
in these days of prosperity to adopt the prin- 
ciple of letting well enough alone. Such a 
banker may say that the growth of his bank's 
deposits and the size of his stockholders' 
dividends are satisfactory, and therefore he 
will not worry himself about currency legis- 
lation which could hardly make him more 
prosperous and might make him less. A 
canvass of the opinions of many bankers 
might leave doubt as to whether or not there 
is any currency problem. Certainly there are 
many successful financiers who will say that 
there is not. Thev will tell you that we have 
a currency as good as gold ; that no one ever 
480 



The Currency 

has to consider whether one note is better or 
worse than another, for all are equally cer- 
tain of final redemption in gold. They will 
tell you that there is no lack of currency in 
a country which has been able to increase its 
gold stock in ten years from $500,000,000 
to $1,475,000,000. They may even say that 
there is not much indication of rigidity in a 
bank-note system where the volume of note- 
issues has risen from $215,000,000 to $560,- 
000,000 in the same ten years. So, at the 
start of any discussion of the currency, we 
have doubt thrown on the very existence of a 
currency problem. We must first examine 
the question as to whether or not there is 
any need at all for the discussion. 

A physician counting the pulse-beat and 
taking the temperature of a patient may fore- 
tell with certainty an impending crisis in the 
patient's physical welfare. A temperature 
of 103 and a corresponding quickening of the 
pulse-beat means that the patient is in dan- 
ger and that the cause of that danger must 
be removed, or sooner or later serious results 
may ensue. Let me tell you that alternating 
periods of 100 per cent and 2 per cent money 
in Wall Street are just as certain indications 
of a deranged financial system as is the reg- 
ister of 103° in a clinical thermometer a 
sure indication of physical disorder. Serious 
results may not immediately follow in either 
31 481 



Business and Education 

case, but if the evidences of derangement 
repeatedly recur, it is only a question of time 
when, in both instances, unfortunate results 
will follow. 

The physician who finds the pulse-beat too 
rapid does not necessarily locate the difficulty 
in the wrist of the patient, for the reason 
that it is there he finds the evidence that 
something is wrong; nor would there be 
more logic in saying that because we have 
seen periods of lOO per cent money in Wall 
Street, the seat of the difficulty must be 
in Wall Street and the remedy should be 
applied there. The trouble is not with Wall 
Street ; jtj^s fundamental j^d is inhere ntly 
related to our unscientific currency laws^ 

Periods of excessively high rates for 
money, recurring seasons of stringency fol- 
lowing each demand for funds with which 
to move the crops, other periods of super- 
abundance, of gorged bank vaults and in- 
terest rates falling to a point where the return 
on a loan is hardly worth the expense of 
making it, — all these things are significant 
signs of our imperfect financial system. 
They point, I believe, with absolute certainty 
toward organic weakness. The fundamental 
causes which lead at one time to manifesta- 
tions of high rates and at another to abnor- 
mally low rates, that bring periods of strin- 
gency followed almost in a day by periods in 
482 



The Currency 

which funds accumulate more rapidly than 
they can be wisely employed, — the funda- 
mental causes of such changes are dangerous 
to permanent prosperity. Just as surely as 
temperature and pulse-beat may become 
physical danger signals that the wise man 
should promptly recognize, just so surely 
we are receiving periodical warnings in the 
abnormal register of the pulse of Wall 
Street money-rates, and in the alternating 
periods of currency stringency and currency 
redundancy that may be observed at all the 
money centres. 

If we sit smugly by and say that we are 
satisfied with the measure of prosperity 
which we are having, and that we think we 
shall go on very well with things as they are, 
then sooner or later we shall come to another 
period that is not satisfactory. We shall 
come to another period such as has preceded 
the enactment of most of the important ex- 
isting financial legislation. Then we are 
likely, in great haste and with little consid- 
eration, to enact legislation which might bet- 
ter be undertaken before the necessity for it 
becomes painfully evident. 

I believe there is the gravest need for 
legislation which will provide a scientific sys- 
tem of bank-note currency. I believe too 
that there is no group of men upon which 
the responsibility for such legislation lies so 
483 



Business and Education 

heavily as it does upon the members of the 
Xew York State Bankers' Association. Con- 
gress is not alone to blame if vre are lacking 
in wise currency laAvs. If financial leaders 
are utterly oblivious to the necessity for such 
laws, if bankers, even after they come to the 
conclusion that legislation is desirable, are 
unable to reach an agreement as to what sort 
of legislation is expedient, it is with poor 
grace that those financial leaders and those 
bankers blame Congress for failing to enact 
wise laws. 

There is no association of bankers upon 
whom the responsibility for a clear under- 
standing of the currency problem falls with 
so much force as it does upon the bankers 
of Xew York. The bankers of Xew York 
will hardly deny that the financial centre of 
the country is there. A\hth leadership come 
grave responsibilities. 

Xew York is the financial centre. Xew 
York bankers ought to accept the financial 
leadership. They ought to have well-consid- 
ered opinions upon the currency. The finan- 
cial portion of the whole country looks to 
Xew York for this leadership. For Xew 
York bankers to say that anything practical 
in the way of suggestions must, for political 
reasons, come from some other quarter, is 
but a cheap way of escaping responsibility. 
For the financial leaders of Xew York to 
4S4 



The Currency 

say that the popular prejudice against Wall 
Street is so great as to prevent their voices 
being effectively heard, and that it is useless 
for them to devote thought to a problem the 
solution of which must, because of political 
exigencies, come from some other place, is 
to offer but lame excuses for failure to do 
their duty. 

I believe there is little force in these pro- 
testations behind which New York bankers 
modestly step into the background. Their 
proper place is at the front in a currency 
discussion. Financial leaders should be 
leaders in fact; although in truth not a 
few of them have given less earnest con- 
sideration to the great national question 
of the currency than they have to any one 
of dozens of corporate underwritings or 
reorganizations. 

I believe the country is ready to accept the 
leadership of New York if New York will 
accept the responsibilities of her position. If 
New York bankers will study the currency 
problem until they are ready to bring forth 
a plan which they believe is the best for the 
whole country, — a plan which is not narrow 
and provincial, a plan free from personal 
and local bias, — then the judgment of New 
York bankers will be received by the rest of 
the country with respect and consideration. 

If the officers of the institutions repre- 
485 



Business and Education 

sented in the membership of the New York 
State Bankers' Association will reach sub- 
stantial agreement in regard to what consti- 
tutes the currency problem, agreement as 
to what are the principles underlying its 
correct solution, and what forms of legis- 
lative enactment will be wise from the point 
of view of the whole country, I am perfectly 
confident that the whole country will soon 
come into hearty accord Avith that opinion. 
The principal reason that New York has 
been unable to influence the public opinion 
of the country on financial matters has been 
that New York bankers have had no well- 
considered conclusions. They have not ac- 
cepted the responsibilities of leadership. 
They have failed to give the subject the 
consideration it merits. They have reached 
no agreement in regard to the course which 
ought to be followed. 

The country believes that when there is 
real need for legislation that need will be 
recognized by the leaders of finance. If the 
bankers of New York would once clearly 
recognize the need, that fact alone would go 
a long way toward making the country see 
the necessity for action. New York bankers 
may think it is easier to temporize, but the 
country looks to New York in this instance 
to accept the responsibilities of leadership. 
It looks to New York to recognize the neces- 
486 



The Currency 

sity for legislation if urgency exists. It ex- 
pects New York bankers with unanimity to 
point out a course that, with the welfare of 
the whole country in mind, will be the wisest 
to follow. 

If financial disaster should ever come be- 
cause we have failed to enact proper legis- 
lation, the blame for that disaster will lie 
against the bankers of New York more di- 
rectly than against any other group of people. 
The bankers of New York, more than any 
others, have a duty imposed upon them, the 
duty of leadership. They cannot escape the 
responsibilities of leadership. The country 
will some day understand that the financial 
leaders have thus far failed to measure up 
to this responsibility. If that failure ever 
stands out clearly against a background of 
financial disturbance, the fact will not be 
helpful to New York's pre-eminence. 

To my mind we are in a lethargy of suc- 
cess. We hear paeans of prosperity sweetly 
sung on every side. Unexampled totals 
mark the measure of every phase of indus- 
trial and commercial life. We have engaged 
in expenditures of capital on a scale so vast 
that it makes the financial operations of other 
days seem petty by comparison. Labor was 
never before so fully or so profitably em- 
ployed. Business was never more active. 
And so, some of us say, there surely can be 
487 



Business and Education 

nothing wrong with a situation that gives 
such evidence of health and growth. 

Truly it is a magnificent organization of 
business which we have. With the health 
and vigor of the business condition impressed 
upon us, it is difficult to understand that an 
occasional irregularity of the financial pulse- 
beat may be an important warning. The 
pulse-beat of abnormal money-rates in Wall 
Street, rates that are abnormally low or 
abnormally high, have recurred and passed, 
and it is easy to believe that they mean 
nothing serious. It is, perhaps, hard to be- 
lieve that a brief period of overflowing bank 
vaults might in the end work toward serious 
disorganization of this magnificent fabric of 
business. We see undue accumulations of 
currency at the financial centres; we see 
banks that must pay interest on these swol- 
len deposits reloan the money with nervous 
haste at any return, no matter how low ; we 
know that funds in this way may some day 
become tied up so that there may be the 
greatest difficulty in liquidating the loans 
to meet an unexpected demand, but it does 
not seem to come with much force to the 
average banker that the legitimate result of 
such a situation may be financial disaster. 

Even though a clinical thermometer reg- 
isters a degree or so toO' high a temperature, 
a strong man may think it a matter which 



The Currency 

in his strength he may disregard, and so the 
business community seems to rest in the 
security of an all-pervading prosperity while 
the vast financial work of the day continues 
to be performed by machinery devised two 
score years ago tO' fit a then abnormal situa- 
tion. The free and normal development of 
our banking system has been prevented by 
prohibitions which had their birth in the 
financial exigencies of the Civil War. In 
every other field of activity we have recog- 
nized that new conditions made new machin- 
ery desirable, but the machinery of banking 
has not been permitted to develop so as to 
keep pace with the growth of the work it has 
to do. 

With the increase in the volume of busi- 
ness done in the United States, and with the 
growth of the value of the annual product 
of soil and factories, the margin between the 
maximum and minimum need for currency 
has widened. That margin between the 
greatest amount of currency likely to be 
needed at one period and the least amount 
likely to be needed at another, has probably 
doubled in the last ten or fifteen years as a 
result of our development. 

At the present time there is reason for be- 
lieving that the country at certain seasons 
requires $150,000,000 more currency to 
transact its business than is required at other 
489 



Business and Education 

seasons. Now remember I am talking of 
currency, not of credit. To meet this fluctu- 
ating demand for currency there is abso- 
lutely no provision in our laws. Our bank 
notes increase or decrease in volume as a 
result of the fluctuation in the market price 
of Government bonds, and there is practically 
no relation betw^een that price and the cur- 
rent demand for currency. Our banks are 
permitted to give freely to their customers 
credits in the shape of deposits, but when a 
customer wants to convert that credit into 
the form of a circulating note, he can only 
be accommodated by taking from the vaults 
of the bank its reserve money. 

I believe the first principle to recognize is 
that there is not an essential difference be- 
tween a bank credit in the form of a deposit 
and a bank credit in the form of currency. 
Certain safeguards must be thrown around 
a circulating note that are not required for 
the protection of a deposit, but with that ex- 
ception in view, this principle stands, I be- 
lieve, as perhaps the most important one to 
recognize in a currency discussion, — that 
there is not an essential difference between 
a bank note and a bank deposit, and that the 
customer of a bank ought, under satisfac- 
tory safeguards, to be able to convert one 
into the other at will. 

One other principle that has been fatally 
490 



The Currency 

lost sight of in half the discussions of the 
currency, is the principle that adequate re- 
demption facilities are a certain bar to an 
over-issue of circulating notes. People talk 
of the country being flooded with an asset 
currency. With adequate redemption facil- 
ities such a thing is inconceivable. Let any 
student of the currency question keep in mind 
the idea of providing absolutely adequate re- 
demption facilities, so that a bank note will 
never stay in circulation a day beyond the 
time when a bank credit is no longer pre- 
ferred in that form rather than in the form 
of a deposit, and half the difficulties of the 
inquiry are at once cleared away. 

This is, of course, no place for a thorough 
discussion of the currency question. I have 
no plan to propose. The one thing that I 
want to urge is the importance of providing 
a scientific bank-note currency if we wish an 
indefinite continuance of prosperity, and fur- 
ther to emphasize the responsibility which 
rests particularly upon the bankers of New 
York in presenting a plan for such a cur- 
rency. The plan may take one of half a 
dozen forms. Perhaps the best one, were it 
politically possible, would be the creation of 
a Government bank having the power of 
issue, whose sole business would be in its 
relations with other banks and whose chief 
operations would be the re-discounting for 
491 



Business and Education 

other banks. I do not mean that any ex- 
isting institution could be metamorphosed 
into such a central bank. It would have to 
be freshly organized from the beginning, its 
control would need to be largely in the hands 
of the Government, and its ownership widely 
distributed among banking interests through- 
out the country. The principles of a scien- 
tific asset currency could well be worked out 
through the medium of such an institution, 
as the experience of Germany eloquently 
testifies, but they can undoubtedly be worked 
out in some other way. 

The fear which men so commonly have of 
giving a larger power of note-issue to small 
national banks will largely disappear when 
the opponents of asset currency have once 
fairly in their minds what the result will be 
of providing adequate redemption facilities. 
That a plan can be devised Avhich will safely 
permit every national bank to issue a certain 
amount of notes not secured by Government 
bonds, I have no doubt, and I am inclined 
to think that it is along that line that legis- 
lation is most likely to be obtained, although 
perhaps it is not the ideal solution. 

The thing of which I am absolutely cer- 
tain, however, is that a solution of the whole 
problem could be attained wisely, promptly, 
and easily if bankers would give to a con- 
sideration of the subject anything like the 
492 



The Currency 

attention which it merits. And again I say, 
the responsibihty is on the bankers of New 
York. You cannot hide behind Congress to 
avoid the responsibihty. You cannot shift 
the responsibihty to the shoulders of your 
associates in the West. You are the finan- 
cial leaders, and the responsibility of leader- 
ship is yours. 



493 



BANKING DEVELOPMENTS 

An address delivered before the Illinois Bankers' 
Association, at the Louisiana Purchase Exposi- 
tion, St. Louis, October, 1904. 

It has seemed to me especially fitting to 
attempt to review, in the briefest manner, a 
few of the figures illustrative of our material 
progress, and to try to draw some deductions 
from them. In order to get a setting for our 
comparisons, let us for a moment glance 
back at conditions during the last ten years. 
We will remember that we were, ten years 
ago, just emerging from the depression of 
the panic year of 1893, and that we were 
facing a great political and economic con- 
flict over the silver issue. The whole world 
was filled with distrust in regard to the future 
of our standard of value, and the chilling 
shadow of that distrust was falling heavily 
on our commerce and finances. 

Later came the definite verdict of the 
people, declaring for a sound currency, and 
following that began an unexampled era of 
prosperity such as no other country, in any 
age, has ever known. The expansion went 
beyond all the experiences of men of affairs. 
We had learned lessons of economy, of care- 
494 



Banking Developments 

ful management, and of cheap production 
in the depression which followed the panic 
of 1893, and now we suddenly wakened to 
the fact that we had obtained a grasp on the 
markets of the world. Our exports of manu- 
factures ran up from $183,000,000 to $433,- 
000,000 in half a dozen years, and this in- 
crease of $250,000,000 in the annual average 
of our exports of manufactured products 
made Europe stand aghast at what was de- 
nominated the American commercial inva- 
sion. Our general foreign trade balance 
assumed such totals as to cause economists 
seriously to consider what was to happen to 
the rest of the industrial world if this march 
of progress went on. In half a dozen years 
we piled up against other countries a trade 
balance in our favor of more than $2,600,- 
000,000, — a trade balance far larger than 
the net trade balance had been from the be- 
ginning of our government down to the time 
when this remarkable expansion started. 

And then we made mistakes. We were 
in the midst of a prosperity so great that it 
went beyond the experience of the most ex- 
perienced. With the flood-tide of this pros- 
perity covering all of the old landmarks, it 
was small wonder that there were blunders 
made in steering the craft of business. We 
ran into excesses, extravagances, and mis- 
calculations. Capital made mistakes of over- 
495 



Business and Education 

capitalization ; labor made mistakes of ar- 
bitrary and unwise demands; everybody 
made mistakes of extravagance. Producers 
made errors in estimating the demand, and 
made miscalculations in the multiplication of 
their productive capacity. There was a sur- 
plus demand above our productive capacity, 
and that demand went knocking at the door 
of first one factory, then another and an- 
other, producing the impression on the mind 
of each individual manufacturer that the 
demand legitimately pressing upon him war- 
ranted him in doubling his plant ; and when 
every one started to double his productive 
capacity, capacity soon ran ahead of demand. 
The railroads were caught in much the 
same situation. They made huge engage- 
ments for expenditures which they felt were 
necessary in order to handle the traffic that 
was pressing on them. For the time being, 
far too great a portion of liquid capital was 
absorbed into fixed forms of investment. Di- 
rectly and indirectly, bank credits which were 
payable on demand were, in a dangerous 
proportion, converted into new manufactur- 
ing plants and into new railroads, tracks, 
equipment, and terminals. Bank reserves 
fell until they were a danger signal pointing 
with certainty to the need for more conserv- 
ative administration. Banks applied the 
financial brakes by higher and higher inter- 
496 



Banking Developments 

est rates. Stock-market values, unduly in- 
flated by the spirit of optimism which was 
all-pervading, began to melt. 

Just two years ago this turn came. The 
decline which followed cut a billion dollars 
off the value of securities in a few months. 
The vast readjustment which such a change 
in values made necessary was accomplished, 
however, without panic, without great fail- 
ures, and with few of those disasters which 
usually are the features of such a period. 
The way the country met the situation stands 
to-day as the most striking monument we 
have yet reared to our increasing wealth and 
financial strength. 

We have grown used to cycles in business ; 
to regular periods of expansion followed by 
years of depression. These cycles have been 
of varying length, but, generally speaking, 
a decade would measure the time from one 
upturn to the next. Men of experience, 
therefore, expected that the depression which 
started two years ago would have to run 
through something like the usual course, 
and would last at least for three or four 
years before we had again learned lessons 
of economy and had settled down to a 
solid basis upon which to rear a new struc- 
ture of prosperity. I have said that the 
experience of the most experienced had 
been set at naught by the rising tide that 
32 497 



Business and Education 

had marked the last great wave. Experi- 
ence proved a poor guide in measuring the 
upturn; wiU it hkewise be at fauh in 
measuring the period of depression? Is 
the depression to be of shorter duration 
than in former business cycles? Have we 
already reached, after two years' down- 
grade, a level from which we can again start 
up to new heights of business expansion? I 
cannot answer these questions, but I want to 
present a few statistics that I believe have 
some bearing upon them. 

What I have now to say has absolutely no 
application to the immediate course of the 
stock market. AMiether stocks will be higher 
or lower to-morrow, next week, or next 
month, I do not know, nor am I particularly 
concerned. The fluctuations which mark the 
little surface waves are not matters of such 
moment. It has seemed to me, however, 
that it will be interesting, in view of the 
present condition of business affairs, and 
appropriate, considering the place which has 
been chosen for this meeting, to make some 
comparison of business statistics to-day with 
conditions of ten years ago, and note what 
our position will be ten years hence, if the 
material development of the United States 
is to go on at approximately the same rate of 
progress which has marked the development 
of the last ten years. I believe it is fair to 
498 



Banking Developments 

assume that, generally speaking, something 
like that rate of progress will be maintained. 
Certainly the outlook to-day, with currency 
uncertainty given way to a securely fixed 
standard of value, with a sound and satis- 
factory banking position, and with no left- 
over panic consequences to be reckoned with, 
as was the case ten years ago — certainly 
such a situation offers reason for the pre- 
sumption that we are in as favorable a posi- 
tion for development in the next ten years' 
period as we were at the beginning of the 
last. 

Ten years ago we had a population of 
sixty-eight millions; to-day it is eighty-two 
millions ; and ten years hence, with this ratio 
of increase, the population of the United 
States will be ninety-eight millions. We 
shall in the next ten years add to our number 
a population equal to one-half that of France. 
Such growth in numbers, matched to our 
wealth of resources, makes the sort of mate- 
rial out of w^hich to shape an entirely new 
level of statistics marking the country's ma- 
terial progress. 

The total wealth of the United States, 
according to the best estimates which we 
have, has risen in ten years from $75,000,- 
000,000 to $106,000,000,000. Ten years 
more of increase will make the wealth of 
this country $140,000,000,000. When we 

499 



Business and Education 

remember that such a total Avill compare with 
the total of $42,000,000,000 in 1880, the 
accumulation is seen to be at a rate almost 
incredible. 

Our money stock has increased in ten 
years from $1,600,000,000 to more than 
$2,500,000,000, and CA^ery dollar of it is 
sound, and every dollar of it is on a parity 
with gold. The actual gold stock itself in- 
creased in that period $301,000,000. If the 
money stock increases in the next ten years 
in the same amount, we shall have $3,400,- 
000,000 of circulation at the end of that 
period. Incidentally, it is interesting to note 
that national bank-note circulation in the 
last ten years has risen from $172,000,000 
to $41 1,000,000, and one might stop to won- 
der, if this rate of increase is to go on, where 
the Government bonds are to come from in 
the next ten years to provide for a further 
increase of national-bank circulation of 
$250,000,000 or $300,000,000. Such in- 
quiry points inevitably to the necessity of 
some change in our national banking laws 
in the due course of time. 

National-bank deposits in ten years have 
doubled, going up from $1,600,000,000 to 
$3,300,000,000. State-bank deposits in that 
time have trebled, increasing from about 
$660,000,000 to $1,900,000,000. A care- 
ful estimate of the total bank deposits in 
500 



Banking Developments 

the United States to-day — national, state, 
savings banks, and trust companies — brings 
them up to a grand total of $10,000,000,000, 
and that compares with a total ten years ago 
of $4,600,000,000. The increase has been 
well over double. Will it double again, and 
shall we have $20,000,000,000 deposits in 
1914? If we only make the same actual 
gain, we shall have over $15,000,000,000; 
and, barring any unexpected interference 
with our expansion, I believe that that is a 
conservative figure and inside the probabil- 
ities. Take the case of the institutions that 
each of you represents. Do you not antici- 
pate as much growth in the next ten years as 
you have had in the last? If you do, and if 
those anticipations are fulfilled, and the in- 
crease is general, the total of banking re- 
sources at the end of another decade must 
certainly be an astounding one. Your own 
banks in Illinois have far outstripped the 
average of the country. The total deposits 
of national and state banks in Illinois have 
increased in ten years from $213,000,000 to 
$572,000,000. Why should they not make 
similar gain in the next ten years and Illinois 
deposits stand at $800,000,000? 

In ten years we have seen railroad gross 

earnings increase from $1,200,000,000 to 

$1,900,000,000. With only an equal actual 

increase, we shall have railroad earnings of 

501 



Business and Education 

$2,600,000,000 ten years from now; while, 
if the percentage of increase of the last dec- 
ade were to be maintained, the figures 
would reach $3,000,000,000. The lower 
total is the fairer presumption. With gross 
earnings reaching such a figure, however, 
wdth constantly improving methods of ad- 
ministration, and with more perfect roadbeds 
and equipment, we may expect to see steadily 
increasing economy of operation. Is it not 
fair to presume, then, that these vast gross 
earnings, coupled with a decreasing ratio of 
expenses, will most certainly provide for an 
increasingly satisfactory return upon rail- 
road investments? 

I will not weary you with too many statis- 
tics. If you are interested in pursuing such 
a line of inquiry, get the Monthly Summary 
of the Bureau of Statistics from Washington. 
In its way it is as great an exposition of 
statistics as is this World's Fair an exposi- 
tion of material things, and it will well repay 
study. You will see from the figures which 
you will find there, for instance, that our 
foreign trade, which ten years ago footed 
$1,500,000,000, was this year $2,450,000,000. 
Our exports of agricultural products may not 
increase much from present figures, but it 
is safe to say that our increasing command of 
foreign markets for our manufactures will 
perhaps bring the total of our foreign trade 
502 



Banking Developments 

to $3,000,000,000 in the next decade. You 
will see that national-bank loans and dis- 
counts, which were under $2,000,000,000 
ten years ago, are now $3,725,000,000. An 
equal increase would carry us above, $4,- 
500,000,000 in national-bank loans ten years 
hence. Let us hope those loans will not in- 
crease with unconservative rapidity. Bank 
clearings of the country have increased two 
and one-half times in ten years. If progress 
were to continue at this rate, we should show 
bank clearings of more than $200,000,000,- 
000 at the end of the next ten years. You 
will find that the total mineral production 
of the United States has increased in value 
from $650,000,000 to double that figure. If 
there is reason to suppose that this increase 
will continue, we shall yet make a record of 
$2,000,000,000 as the annual product of our 
mines. Our production oi steel has doubled 
in ten years. The value of the product 
of our cotton mills increased 52 per cent. 
The volume of business, as measured by 
the receipts of the Post-Office Department, 
shows almost 100 per cent increase, those 
receipts coming up from $75,000,000 in 
1894 to $144,000,000 for the present fiscal 
year. 

These illustrations might be indefinitely 
continued, but I have given enough to point 
out the one conclusion which I wish to em- 

503 



Business and Education 

phasize, and that is that you men who admin- 
ister the great banking resources of the 
State of IlHnois need to keep constantly 
before you some of these broad statistics of 
our material progress. Their study cannot 
help but be encouraging and useful. They 
must lead to the conclusion that, in the com- 
bination of population and natural resources, 
we stand, as a country, absolutely unrivalled, 
and with nothing to balk our progress but 
our own mistakes. 

If we look abroad, we see England strug- 
gling under most adAxrse conditions, a great 
portion of her industrial population actually 
underfed, and a million people receiving aid 
under her poor-laws. AA^e see in France a 
nation grown rich by thrift, a nation where 
economy has become a disease, and in the 
growth of it all initiative for new accom- 
plishments has been lost. In Italy we see a 
great industrial aAvakening, but conditions 
still so hard that a large percentage of our 
800.000 of immigrants annually come from 
that country. In Germany we find a barren 
land yielding from the fields most meagrely 
and from the mines hardly at all, but with a 
population Avhose energ}', intelligence, and 
education have built out of most discourag- 
ing conditions a vast industrial organization 
which is our one real competitor in the mar- 
kets of the world. If we will accept from 
504 



Banking Develo'pments 

the Germans something of their scientific 
methods, 'their carefulness, their thorough- 
ness, and their wilhngness for hard work, 
and bring such quahties to bear upon our 
own resources, the figures which I have been 
quoting as possibihties of the future will yet 
look small. 

These statements are generalities intended 
to apply only over considerable periods. 
That the next ten years are to see to some 
extent a repetition of the development of the 
last ten is, I think, a fair presumption. 
Whether that upward movement has already 
started, or whether it is to start next month 
or next year, I do not profess to know, and 
nothing that I have said should be taken as 
indicating the fixing of a definite date in 
regard to returning prosperity. Business to- 
day is unsatisfactory in many respects. The 
memories and sore spots which the declines 
of the last two years have left will make 
many people slow in accepting the conclu- 
sion that we are ready for another great 
commercial advance. We are always in 
danger of overdoing, and we may for the 
moment, perhaps, have already made that 
error, for prices have shown fnost substan- 
tial recovery — a recovery certainly in ad- 
vance of what would be warranted by the 
present actual conditions. It is safe to say, 
however, that we are to-day in a sound finan- 
50s 



Business and Education 

cial position. Bank reserves are ample; at 
least national-bank reserves are. Bank loans 
and discounts are not of a character to offer 
grounds for any general criticism. Wt have 
probably fully paid off the foreign indebted- 
ness in the shape of finance bills which two 
or three years ago had reached large totals. 
We are in a position to command interna- 
tional credits, and to bring gold to strengthen 
our reserves, if we should need it. We have a 
corn crop that is worth $1,000,000,000, a cot- 
ton crop worth $600,000,000, and a wheat 
crop worth $412,000,000. The value of these 
three crops alone this year is $2,012,000,000, 
which compares with the value of these same 
crops ten years ago of $1,067,000,000. 

We have learned some valuable lessons in 
finance, and the memory of the last two 
years, reminding us of the results of the 
mistakes made at the height of the boom 
period, is still clearly enough in our minds 
to warrant the belief that we shall administer 
our financial affairs with a fair degree of 
common-sense for some time to come. We 
have learned that there is not a new political 
economy, but that, in spite of our vast re- 
sources, our growing wealth, and our recu- 
perative power, we must obey the same old 
sound laws of finance and commerce that 
have long ruled. 

I am convinced that the possibilities of 
506 



Banking Developments 

another great business expansion are at 
hand, but connected with those great pos- 
sibihties are great responsibihties. Those 
responsibihties are largely on our shoulders. 
The bankers of this country will, in the wis- 
dom of the administration of their trust, or 
in their lack of wisdom, have great influence 
on the beginning, the extent, and the length 
of this next period of prosperity. 

I cannot too strongly emphasize my be- 
lief in the importance of having our banks 
and financial interests prepared to play their 
proper part in the return of prosperity and 
the further development of business. We 
need banking laws that are wise and bank- 
ing administration that is wise. Encourage- 
ment to a wild speculative boom, at this time, 
when improvement is justified more by hopes 
and possibilities than by immediate actual 
conditions, might set the whole period of re- 
covery back a month, six months, a year. A 
great speculative boom now is not what is 
needed. It is indeed one of the special dan- 
gers. If bankers in the great centres are not 
conservative in the inducements they hold 
out to secure deposits, if they accumulate 
great stocks of money which will loan at 
such low rates as to encourage unduly a 
speculative spirit, they will strike a blow at 
this returning prosperity which may long 
delay its coming. 

507 



Business and Education 

There is another danger in the banking 
situation. During* the height of the last 
commercial expansion people so lost their 
heads that they excused extravagant and 
foolish actions by saying that there is a 
new political economy, that the old laws no 
longer apply under the new conditions. 
They were wrong, lamentably wrong. And 
to-day aching foi^bankers oi this country to 
remember is that there have been discovered 
no new laws of finance which make banking 
without reserves safe and conservative. A 
bank holding money repayable on demand 
must keep a fair proportion of that money in 
its vaults. The experience of all financial 
history points to that necessity. Whenever 
that law has been violated, disaster has ul- 
timately followed. Do not permit your- 
selves to believe that there has been any new 
discovery in finance which will safely permit 
banking without reserves. 

I believe that the conditions are again 
favorable to a return of prosperity. I be- 
lieve it is time for optimism. So long as 
we remember in humbleness our mistakes 
and hold close to a proper conservatism, the 
course of financial events seems likely to fol- 
low only one general direction, and that is 
toward improvement, toward expanding 
business, and toward better times. 



508 



THE LESSONS OF OUR WAR 
LOAN 

The Forum, 1898; written when the author was As- 
sistant Secretary of the Treasury. 

The United States has floated a $200,000,- 
000 loan at the lowest rate of interest at 
which a nation ever disposed of its oblig-a- 
tions in time of war. It has received sub- 
scriptions of $7 for every $1 of bonds offered 
the public, or, roundly, $1,400,000,000 for 
the $200,000,000 loan. Under the provi- 
sions of the law as passed by Congress, every 
subscription made by a syndicate, corpora- 
tion, or association was rejected; Congress 
having taken the broad ground that individ- 
uals should have preference. Every sub- 
scriber asking for more than $4,500 received 
no portion of his subscription, as the entire 
loan was absorbed by individual offers for 
smaller amounts; the allotment being made 
under the provisions of the law so that the 
humble investors had preference over the 
richer ones. Half of the loan, more than 
$100,000,000, has gone to 230,000 people, 
each of whom subscribed for $500 or less. 
The number of persons who applied for the 
bonds reached 320,000; and if they were 

509 



Business and Education 

mustered into military ranks they would out- 
number by almost 100,000 our army of regu- 
lars and volunteers enlisted for the Spanish- 
American War. Standing at dress, side by 
side, they would form a line one hundred 
and twenty miles long, — a line that would 
reach clear across Cuba at its broadest point 
and half-way back, or from Washington to 
Philadelphia. Had all these investors pre- 
sented their subscriptions with the currency 
attached, it would have required three times 
the cash held in the vaults of the thirty-six 
hundred national banks of the country. 
Some idea of the enormous total of $1,400,- 
000,000 subscribed by these 320,000 persons 
may be gained by a comparison with the 
amount of money in circulation in the 
United States on August i, 1898. On that 
date the money of all kinds in circulation 
aggregated $1,809,198,000. If the United 
States had accepted in currency all the sub- 
scriptions made^ the Treasury would have 
absorbed seven-ninths of all the money in 
circulation. 

]\Iore than $100,000,000 in cash was 
turned into the Treasury as the subscriptions 
were made, and before the delivery of bonds 
was begun. The remaining $100,000,000 is 
being gathered in as fast as the augmented 
machinery of the Treasury can collect it. 
The handling of this vast sum has been so 



Lessons of Our War Loan 

careful that rates of interest in the New 
York money market, after the books were 
closed and the bonds began to be issued, were 
as low as i^ per cent, i.e., materially lower 
than before the loan was offered. The whole 
transaction was accomplished with scarcely 
a perceptible movement at the money cen- 
tres, and absolutely without creating the 
smallest degree of stringency or congestion. 

Such illustrations as these give some in- 
dication of the success of this first experiment 
of ours with a really popular loan. It has 
been a phenomenal success; and it presents 
a good many new features in financial affairs. 
It furnishes the only real test we have ever 
had of a popular subscription. It exhibits 
the credit of the United States in the most 
favorable light in which it has ever been 
seen. It shows the investing strength of the 
people to be greater than the most optimistic 
would have supposed, and our gain in finan- 
cial prestige must be regarded as one of the 
foremost results of the war. 

From the time when Congress, with 
hardly a word of debate, appropriated $50,- 
000,000 for the national defence, to the act- 
ual beginning of hostilities, scarcely a day 
passed without some event which made it 
apparent that the Government revenues must 
be augmented by loan. The Bill to provide 
ways and means to meet war expenditures 

511 



Business and Education 

was a measure which showed far more 
courage than legislators are apt to evince 
when such a crisis comes. It was a measure 
that laid the tax-collector's hand on every 
business — in fact upon every citizen — and 
was designed to draw into the Treasury an 
enormous additional revenue. The operation 
of a revenue law is too slow, however, for 
such exigencies as war; and, with expenses 
reaching an average of $1,250,000 a day, the 
necessity for an issue of bonds was plain. 
When it became known that Congress con- 
templated fixing the rate of interest at 3 per 
cent there was a quiet protest from some of 
the great financiers. Three per cent, they 
declared, was too low. They pointed to the 
rate at which former bond issues had been 
made in time of peace. They called atten- 
tion to the fact that the 4 per cent bonds of 
1925 were selling as low as iiy}i, a basis 
which would net the investor nearly 3^ per 
cent. They asked why heavy subscriptions 
to a short-term bond at 3 per cent should be 
expected, when one could go into the market 
and buy a bond of exactly as good character, 
and with a far longer term to run, on a basis 
that would net 3M per cent. Not a few of 
the financial leaders were sore in spirit over 
the criticism that had followed them after 
the last Government bond sale. They felt 
that they had come forward then at a time 
512 



Lessons of Our War Loan 

when the Treasury was in great peril, and 
had furnished money that was badly needed, 
and, in addition to furnishing money, had 
undertaken a most expensive contract to pre- 
vent gold exports. Their profits had been 
but a fraction of what the public imagined 
them to be; and the execrations that had 
been heaped upon them had left little desire 
at this time to turn in and, from purely 
patriotic motives, aid the Treasury in its 
financing. 

The Secretary of the Treasury saw some 
of the leading financiers who held these 
views. He met their objections so com- 
pletely that his suggestion, that the great 
financial interests should show to the country 
a broad-spirited patriotism such as would 
quiet the host of critics, was received with 
surprising good-will. His suggestion was 
one that might at first view seem almost 
mijxotic. considering the rate at which Gov- 
ernment bonds were then selling. It was 
that some of the important financial interests 
should come together and guarantee, without 
profit to themselves, the absolute success of 
the loan, — that they should agree to take all 
or any part that should be unsubscribed by 
the people. This underwriting of $200,000,- 
000 of securities at a price substantially 
higher than that at which similar securities 
were selling in the market was to be done 
33 513 



Business and Education 

solely for the good that would follow such 
an exhibition of disinterested and patriotic 
financiering. 

The result of Secretary Gage's suggestions 
was, that on the morning of the day the sub- 
scription opened two syndicate bids were re- 
ceived : one from the National City Bank, 
Vermilye & Co., and the Central Trust Com- 
pany, and the other from a syndicate headed 
by Mr. J. Pierpont Morgan. Each of these 
syndicates agreed to take all or any part of 
the issue not taken by the public. That 
guarantee put spirit into the loan from the 
first moment. People said : " If the New 
York bankers stand ready to take the whole 
loan twice over, it must be a good thing to 
have." 

There were two reasons why the subscrip- 
tion should be an assured success, in spite 
of the fact that shortly before it opened Gov- 
ernment bonds were selling on a 3/4 .per cent 
basis. One was that, although there were 
marked quotations for the 4 per cent bonds 
on that basis, it could not be called a settled 
or fairly established market price. A few 
bonds could no doubt have been bought at 
that price. Any attempt to purchase a large 
block would have sharply advanced the quo- 
tation, although it is probably equally true 
that a large block thrown upon the market 
would have depressed the price. The reason 
514 



Lessons of Our War Loan 

why it was certain that a market could be 
found for the whole issue on a 3 per cent 
basis was in the use which could be made of 
the bonds by national banks as a basis for 
new circulation, or to replace the old 4's and 
5's which banks had on deposit to secure 
their circulating notes. 

The superiority from the standpoint of 
profit of the new 3-per-cents over the 4-per- 
cents of 1925 as a basis for national-bank 
circulation is shown by the following table : 

TYPICAL ILLUSTRATION OF $100,000 
INVESTMENT 





S's of 1908-18 at par 


4's of 1925 at 127! 

@I28 


Capital invested . . 
Par value of bonds pur- 
chased 

Circulation .... 
Receipts : 

Interest on circulation 
(6 per cent) . . . 
Interest on bonds de- 
posited . . . . 


$100,000.00 

100,000.00 
90,000.00 


$8,400.00 
962.50 


$100,000.00 

78,354-55 
70,519.09 




5,400.00 
3,000.00 


4,231.15 
3,134-18 




Gross receipts . . 
Deductions : 

Tax 

Expenses 

Sinking fund .... 


900.00 
62.50 


goo. 00 
62.50 
337-67 


$7)365-33 


Total deductions . 


1-437 


0.065 


1,300.17 


Net receipts 

Interest on capital in- 
vested (6 per cent) . . 


$75437-50 
6,000.00 


$6,065.16 
6,000.00 


Profit on circulation : 

Amount 

Per cent 


$1,437-50 


$65.16 



Advantage of 3's at par over 4's at 
per cent. 



[27^ @ 128, August I, 



515 



Business and Education 

The Government Actuary, before the 
books of the loan were opened, had figured 
for the Secretary that the new 3 per cent 
bonds at par would be equivalent, as a basis 
for national-bank circulation, to the 4-per- 
cents of 1925, if the latter had been quoted 
at so low a figure as iii. At that time the 
actual quotations of the 4-per-cents of 1925 
ranged from 120 to 123. 

The 3-per-cents of 1908-18 purchased at 
par, August i, 1898, as security for circula- 
tion of bank notes, will yield a profit of 1.437 
per cent. The 4's of 1925, in order to yield 
the same profit, would need to be purchased 
at 1 10 2V ; whereas they were quoted August 
I, 1898, at the high rate of 127^4 @ 128. 

Congress introduced a novel element into 
Government financiering when it provided 
that " in allotting said bonds the several sub- 
scriptions of individuals shall be first ac- 
cepted, and the subscriptions for the lowest 
amounts shall be first allotted." 

This latter provision brought a new ele- 
ment of chance into the loan, such as had 
never been in a bond issue before. No one 
could tell just where the line would be 
drawn below which all individual subscrip- 
tions would be filled in full, and above which 
no subscriptions would receive allotments. 
It was evident that the Treasury could not 
ask full payment to accompany the subscrip- 
516 



Lessons of Our War Loan 

tions, because of the impossibility of saying 
whether an allotment would be made to a 
subscriber. It was plain, too, that the plan 
under which the previous bond issue had 
been regulated, permitting bids to be made 
without any deposit of earnest money, would 
never do. A medium was struck. It was 
decided that by no chance could the bona 
fide subscriptions of $500 and less absorb 
the total amount. Therefore announcement 
was made that all subscribers for $500 or 
less should make full payment ; and the 
Department promised that an allotment of 
bonds would be absolutely made on every 
such subscription. Those who subscribed 
for more than $500 were required to deposit 
2 per cent thereof to insure the good faith 
of the application. Allotments in this class 
were to be made inversely to the size of 
the subscription. The most sanguine friends 
of the popular loan idea hardly anticipated 
that the subscriptions for $500 and less 
would reach an aggregate of over $30,000,- 
000 or $40,000,000; and many good judges 
placed the limit well below those figures. 
As a matter of fact, the subscriptions for 
$500 and less reached an aggregate of a little 
over $101,000,000. 

It was evident soon after the books of the 
loan were opened that persons who wished 
blocks of the bonds were getting individuals 

517 



Business and Education 

to subscribe in their interest. The Treasury 
Department immediately interposed such 
obstacles as it could command in the way 
of such plans. In every case where blocks 
of subscriptions came in accompanied by 
powers of attorney authorizing banks or any 
person or interest other than the subscriber 
to receive the bonds, the subscription was 
held in suspense until the bank or person 
sending in such blocks of subscriptions made 
answer unequivocally as to whether or not 
the subscriptions were bona fide and solely 
in the interest of the persons signing the 
subscription blanks, and whether the bank 
or any person other than the subscriber had 
an ulterior interest in the subscription. More 
than $40,000,000 of subscriptions were thus 
suspended, and the persons sending them 
were catechised as to their bona fide char- 
acter. It was, of course, quite impossible 
for the Treasury to organize itself into a 
trial court and take evidence. The Depart- 
ment was forced to accept the statements 
made by the subscribers, although it used 
with good effect the machinery of the Secret 
Service in verifying such statements. Sub- 
scriptions representing millions were re- 
turned to the senders, who frankly admitted 
that they had misunderstood the conditions 
and wished no improper advantage. It is not 
claimed that the subscription list was kept 

518 



Lessons of Our War Loan 

entirely clean from subscriptions received in 
the interest of persons other than the sub- 
scribers. Undoubtedly false statements were 
in some cases made, and blocks of bonds 
secured in a way not within the spirit of the 
law ; but it is a fact that the most strenuous 
efforts were used at every stage to prevent 
persons having no real interest in the sub- 
scription from subscribing and immediately 
assigning their interests to some banking 
institution. 

As the subscription advanced, quotations 
began to be made for the future delivery of 
the bonds. Trades were made at 102, — 
103, — and finally as high as 105^. To 
get the new bonds looked like getting gold 
dollars at a discount. With standing offers 
of 3 or 4 per cent premium, it was small 
wonder that the last days of the subscription 
saw some phenomenal receipts. On each of 
the last two days the Department received 
25,000 applications. It was not growing 
patriotism on the part of the humble invest- 
ors that so increased the mail. It was market 
quotations showing a substantial premium 
for bonds that the Government was offering 
at par. 

From the point of view of a popular sub- 
scription the loan was in every way an 
astounding success; but it must not be for- 
gotten that there were elements of specu- 
519 



Business and Education 

lation as well as of patriotism, that there was 
a market showing immediate profit for every 
person who could secure a bond. 

The task of handling the loan has been 
one that few people have comprehended. 
The action of Congress in providing an issue 
of bonds of so low a denomination as $20, 
in giving preference to individual bidders, 
and in providing that allotments should be 
made in an inverse order to the size of the 
subscriptions upon all individual offers, made 
an amount of detail such as had been un- 
known in the Department's previous expe- 
rience. The provision for payment in five 
instalments, and the necessity for interest 
calculations on each one of these partial 
payments, added vastly to that detail. In- 
deed, the task at last was one that was clearly 
the greatest clerical undertaking in which the 
Government ever engaged in the same lengtbi 
of time. 

Congress is always jealous of depart- 
mental preparations in advance of legisla- 
tion; and no actual step could be taken by 
the Treasury Department to prepare for this 
issue of bonds until the war measure had 
passed both the House and the Senate. The 
final action was taken when the House con- 
curred in the Senate's amendment at noon, 
Saturday, June 11. At 3:30 that afternoon 
the copy for the preliminary circulars and 
520 



Lessons of Our War Loan 

instruction blanks was in the hands of the 
pubHc printer. At nine o'clock Monday 
morning the public printer delivered to the 
Treasury Department the first instalment of 
4,000,000 sheets of printed matter; and the 
rest followed as rapidly as they could be 
unloaded from the wagons. 

A great force had been engaged in ad- 
dressing envelopes to contain the subscrip- 
tion papers and circulars of information. 
In a little over twenty-four hours after the 
receipt of the first printed copies the mails 
were carrying these circulars to every bank, 
national. State, and private, to every post- 
master, and to every express-of^ce in the 
country, while to 24,000 newspapers details 
were sent, so that they might give informa- 
tion to the people concerning the character 
of the Government bond, and how subscrip- 
tions would be received. 

There was in the arrangements every 
element of popular success. The bonds were 
issued in a popular cause. They were issued 
at a time when money was easy and securities 
were high. They were issued at par ; so that 
there was no calculation to discourage the 
most inexperienced investor. Any man with 
$20 knew that he could invest it, and get a 
$20 security back. There was no commis- 
sion, no premium, no restriction as to the 
character of the remittance. Subscribers 



Business and Education 

Avere permitted to send their money in any 
form in which credits could be forwarded; 
and the Treasury received any form of cur- 
rency of the United States, any kind of bank- 
check or draft, as well as post-office money- 
orders, and express money-orders. Could 
there have been more perfect conditions for 
a successful popular loan? 

The more enthusiastic advocates of a pop- 
ular loan were particularly pleased with 
those regulations of the Department which 
provided for receiving subscriptions at post- 
offices and remittances by post-office money- 
orders. It is interesting to note that out of 
the total subscription only $728,000 was 
received through this channel. Posters Avere 
hung up and subscription-blanks distributed 
to over 20,000 express-offices; for it was 
believed by some that many people who had 
not banking connections would avail them- 
selves of this eas}^ means of transmitting 
money. The total receipts in the shape of 
express money-orders were but $60,000. 
There was received through the mails in 
currency over $731,000. It was not a rare 
thing to receive a $1,000 bill in an unregis- 
tered letter. It is a tribute to the excellence 
of the mail-service that there was no com- 
plaint from this vast army of subscribers of 
the loss of a currency remittance. 

As a matter of fact the subscription illus- 
522 



Lessons of Our War Loan 

trates wonderfully well how thoroughly 
educated are the people of the United States 
in the use of banking instruments. Over 
$100,000,000 in checks, drafts, and certifi- 
cates of deposit were received from sub- 
scribers for the $500 and smaller bonds, 
while the 2-per-cent deposits on the subscrip- 
tions for the larger amounts were wholly in 
the shape of certified checks. About $198.- 
500,000 of the $200,000,000 bonds issued 
will be paid for by means of bank-paper and 
certificates of deposit. 

Some idea of the detailed work in con- 
nection with the issue can be had from some 
figures of the loan. Subscriptions were 
received from 320,000 persons. Among 
these there were 230,000 of individual sub- 
scriptions for $500 or less. The subscription 
was made up roundly as follows : 

Individual subscriptions for $500 

and less $101,000,000 

Individual subscriptions for amounts 

larger than $500 358,350,000 

Subscriptions of corporations, as- 
sociations, etc 434,650,000 

Syndicate subscriptions .... 500,000,000 

Total, $1,394,000,000 

The loan closed at three o'clock of the 
afternoon of July 14. In less than three 
hours every corporation subscription was in 
the mail with a letter of rejection, and every 
individual subscription for amounts of $50,- 
523 



Business and Education 

ooo and over was also on its return trip with 
a similar letter. Seven hours after the sub- 
scription closed the Department was able to 
announce quite accurately where the line 
would be drawn below which all subscrip- 
tions would be allotted. When it is remem- 
bered that the name of every subscriber had 
to be inscribed at least twelve times in the 
complex process of official book-keeping, 
the collection of remittances, the mailing of 
notifications of receipt and allotment, the 
addressing of envelopes, the making of card- 
indexes, and in the writing of small checks 
covering the interest from the receipt of the 
subscription to August i (the date when the 
bonds began carrying their own interest), 
some idea of the clerical labor involved may 
be had. 

Allotments were made to practically 300,- 
000 successful subscribers. Multiply that 
by 12, and recollect that every entry of a 
name had to have an independent verifica- 
tion, and it will be seen that this writing of 
3,600,000 names and addresses was a task of 
no small proportions. But that takes no 
account of the work in connection with the 
$1,200,000,000 subscriptions returned, nor 
of the vast correspondence resulting from 
errors in every conceivable form made by 
subscribers in filling out their blanks and 
sending their remittances. From the time 

524 



Lessons of Our War Loan 

the envelopes were dumped from the mail- 
bags, — a force of twenty people was re- 
quired to open them, — through all the com- 
plicated operations of listing, scheduling, 
collecting remittances, opening accounts, 
calculating interest, and, finally, putting up 
bond and interest-checks and sealing each 
envelope with five wax seals bearing the im- 
print of the seal of the Treasury, the work 
has been performed by a temporary force 
organized and drilled for this special pur- 
pose. The force was employed without 
regard to Civil-Service rules. Legibility of 
handwriting and good moral character were 
the tests imposed. A corps of five hundred 
clerks has been engaged on the work. For 
the expenses of the issue, the getting out of 
circulars, stationery, employing clerical help, 
engraving and printing bonds, and, finally, 
paying the express companies for transport- 
ing them. Congress has allowed -^ of i per 
cent, — the smallest commission for expenses 
ever paid by the Government for the floating 
of any loan. 

The sealing of the packages is alone a 
great task. Five seals are put on each 
package; and there will be about 300,000 
packages; representing a total of about 
1,500,000 wax seals. The bonds are de- 
livered by express companies; the Govern- 
ment paying charges, and the companies 
525 



Business and EdticaUon 

being pecuniarily responsible for correct 
delivery. 

The permanent work of the Treasury 
Department will be materially increased by 
this issue. The addition of such a great 
number to the total of outstanding bonds will 
add enormously to the work of making inter- 
est payments ; the increase in number being 
far out of proportion to the increase in the 
outstanding funded debt, because of the 
small denominations and the widely scat- 
tered holdings. It is just as much clerical 
work to take care of a lifteen-cent coupon 
which matures every three months on a $20 
bond as it is to pay the interest on a $10,000 
bond. 

The cost of handling a $20 bond makes 
it a rather expensive security to the Govern- 
ment. But, when looked upon in the broader 
sense, these $20 bonds are the best form of 
security the Government has ever issued. 
The great multiplication of bondholders, 
which has resulted from the manner in which 
this loan has been popularized, cannot but be 
an important factor in the national life. If 
it were a fact, that each of the 300,000 sub- 
scribers was a bona fide investor who would 
hold the Government's security as a perma- 
nent investment, the influence of such a dis- 
tribution of Government obligations would 
certainly be marked and beneficial. It is 
526 



Lessons of Our War Loan 

altogether too much to say that all the sub- 
scribers to this loan have purchased the bonds 
with the idea of holding them permanently 
in their strong-boxes. In any consideration 
of this phase of the loan, the fact must not 
be lost sight of that the bonds were quoted 
at a marked premium during the whole time 
the loan was in progress, and that the Gov- 
ernment was selling a security at par which 
the purchaser knew he could resell at an 
immediate profit. Speculation and not per- 
manent investment, therefore, was to^ a great 
extent the moving factor. Undoubtedly the 
issue will be largely consolidated, and many 
of the bonds will find their way into the 
hands of the people who will pay the most 
for them. 

As a general proposition, Government 
bonds are worth most to national banks, as 
they can use them as a basis for circulation 
or as security for Government deposits ; and 
that being the case, it naturally follows that 
a large number of these bonds will find their 
way into the assets of the national banks. 
This is nO' argument against the popular suc- 
cess of the loan, but is merely a factor to be 
considered in measuring that success. 

After every allowance is made, after all 
the modifying conditions are considered, 
there still remains the fact that this loan has 
been a remarkable exhibition of financial 

527 



Business and Education 

strength, of faith in the Government's secur- 
ities, and of the disposition of the Govern- 
ment to favor in its financial operations people 
of small means. In this latter respect the 
response has been everything that could have 
been expected. Small investors have shown 
their readiness to deal directly with the Gov- 
ernment, and in great numbers have become 
purchasers of small amounts of bonds. The 
nation is stronger because of this distribu- 
tion of its securities. The people are well 
satisfied, because of the opportunities that 
have been offered them. Critics of capital 
have been robbed of some of their much-used 
illustrations by the remarkably patriotic 
action of the great financial interests in 
guaranteeing the success of the loan; and 
the w^hole financial world has been enlight- 
ened as to the solidity of our institutions by 
the object-lesson of a 3 per cent war loan 
selling in the market at 105 while hostilities 
were still in progress. 



52^ 



THE TREASURY! 

Scribner's Magazine, 1902. 

Astonishment at the extent and diversity 
of interests embraced in the Treasury De- 
partment must have been one of the first 
sensations of most Secretaries of the Treas- 
ury after taking up the duties of the office. 
Even if the Secretary had been active in 
pubhc hfe, and possessed passing famiharity 
with the great Department, he would scarcely 
have clearly comprehended its scope, but if 
he were a man coming from an active busi- 
ness career, without opportunity for inti- 
mate acquaintance with the Treasury, the 
first few weeks of his official life, it is likely, 
were marked by daily discoveries of new and 
entirely unanticipated functions. 

The bureaus which are bound together in 
the Treasury Department are, by all odds, 
the most diverse, and at the first casual 
glance it would seem the most unrelated 
that are to be found under the jurisdiction 
of any of the cabinet officers. The public 
thinks of the Treasury Department as the 

1 Since the above was written many of the functions of 
the Treasury Department have been assumed by the De- 
partment of Commerce and Labor. 
34 529 



Business and Education 

fiscal division of the Government's executive 
system. It is a fact, however, that for a good 
many years probably not less than two-thirds 
of the time of the Finance Minister has been 
devoted to problems bearing little or no rela- 
tion to the strictly fiscal business of the Gov- 
ernment. The organization of a Department 
of Commerce, drawing as it will its prin- 
cipal bureaus from the Treasury Department, 
will bring needed relief to a cabinet officer 
who has quite enough to occupy his attention 
in the administration of affairs closely related 
to the Government's financial business. 

The responsibility for raising the reve- 
nues and for their disbursement, now that 
the totals have come to aggregate more than 
one thousand million dollars, would seem 
to be quite enough to lay upon the shoulders 
of any man, particularly if he must take up 
those duties without thorough familiarity 
with their details, as does each new secre- 
tary. But in addition to that duty, there is 
the further responsibility for the solution of 
the problems of an intricate and diverse cur- 
rency system. The Secretary, too, occupies 
indirectly, through the Comptroller of the 
Currency, a supervisory relation to the whole 
national banking organization of the coun- 
try. He is the indirect custodian of $800,- 
000,000 of gold and silver coin, stored in the 
Treasury vaults, against gold and silver cer- 
530 



The Treasury 

tificates in circulation representing that 
coin, and, through his subordinate, the 
Treasurer of the United States, he shares 
the responsibihty for the care of more than 
two hundred milhon dollars, representing 
the cash balance which the Government car- 
ries. All the Mint and Assay officers are, 
through the Director of the Mint, under his 
control. He directs the operations of a great 
factory employing 3000 operatives in the 
printing of money and Government secur- 
ities, and he must there meet the same prob- 
lems of organized labor that other great 
employers have to meet. He is responsible 
for the collection of commercial statistics, 
and is fortunate in finding a bureau for that 
purpose which has a record for the best 
statistical work done by any of the great 
Governments. He is at the head of the 
greatest auditing offices in the world, where 
every dollar of income and every item of 
expenditure is checked over with minute ex- 
actness, so that at the end of the year it is 
safe for him to say that the whole billion 
dollars, the total on both sides of the ledger, 
has been collected and disbursed with abso- 
lute fidelity and legality and without error. 

All these functions are naturally related 

to the management of the fiscal affairs of 

the Government, but there are many other 

bureaus that do not apparently bear such 

531 



Business and Education 

close relation. The Secretary will discover 
that there are almost as many vessels which 
would fly his oflicial flag should he come on 
board as there are ships of war to fire salutes 
to the Secretary of the Navy. He has large 
fleets engaged in light-house and coast-sur- 
vey work, while the revenue-cutter service, 
in which are many swift and modern vessels, 
does police duty at every port. He is the 
final authority in all oflicial judgments relat- 
ing to the more than five hundred thousand 
immigrants who land on our shores annu- 
ally, and he is the responsible executive for 
carrying out the immigration laws and the 
Chinese Exclusion Act. He is the oflicial 
head of the Bureau of Public Health and 
Marine Hospital Service, which guards our 
ports from contagious diseases, maintains 
quarantine service and stations, and a great 
system of hospitals for disabled seamen. 
The Government's Secret Service Bureau 
reports directly to him, and he watches day 
by day the unfolding of detective stories 
more interesting than the dime novels of his 
boyhood days, and there accumulate in his 
files packages of reports, tied with red tape, 
more thrilling than the choicest example of 
yellow-covered literature. Not only is the 
Secret Service Bureau devoted to the detec- 
tion of counterfeiting, but its services are 
called into play in connection with any se- 
532 



The Treasure/ 

cret-service work which the other Depart- 
ments may wish to have done. The Bureau 
of Standards, to which ah questions of 
weights and measures may be finally re- 
ferred, is under his direction. No steam- 
ship may sail in American waters, nor leave 
an American port, the boiler of which does 
not bear the stamp of official inspection by 
one of his subordinates. He is the respon- 
sible head of a Life Saving Service, with 
2^2 stations and a cordon of men patrolling 
10,000 miles of coast; of a Light-house sys- 
tem, marking the course of mariners with a 
chain of lights from Maine away around to 
Alaska; of a Coast Survey, which has for 
its business not only the charting of navi- 
gable waters, but the scientific investigation 
of the earth's curvature; of the Architect's 
Office, which has already constructed and 
has the care of 400 public buildings, most 
of them architecturally bad, and which is at 
the moment engaged in planning and build- 
ing 149 others, many of which, happily, are 
showing great architectural improvement. 

All these duties are in addition to the 
fundamental one of collecting the public 
revenues, a work requiring the maintenance 
of a corps of 6300 officials at 168 ports of 
entry, and of a body of internal revenue em- 
ployees, whose eyes are literally upon every 
foot of the country's territory. 

533 



Busmess and Education 

By no means the least of the manifold 
duties of this official are those which are 
connected with the administration of the 
civil service, for his complete corps num- 
bers 26,000 subordinates. There must be 
endless appointments, promotions, and 
changes, and in regard to them all the Sec- 
retary of the Treasury is the final authority. 

The mere enumeration of such a list of 
responsibilities carries with it the conviction 
that the Treasury of the United States must 
be a wonderfully well organized machine, 
else it would be impossible for any man to 
step into the responsibilities of its direction 
without the change being seriously felt by 
the entire Treasury organization and the 
whole country. The Treasury Department 
is a wonderfully well organized commercial 
machine. Taking it all in all, I believe there 
is no organization in the commercial life of 
this country, look where you will, that is its 
superior ; in many respects one will not find 
its equal. 

We are apt to have none too good an 
idea of our Government administration, and 
sometimes, with scant knowledge of facts 
and conditions, condemn the executive 
branches of the Government. Naturally the 
Treasury has come in for its full share of 
criticism, for it touches every citizen in the 
tender spot of his pocket-book. For my 
534 



The Treasury 

own part, however, every day of greater 
familiarity with the organization was a day 
of growing admiration for it and of increas- 
ing pride that the multitude of affairs en- 
trusted to the head of this Department are ad- 
ministered so intelligently, so promptly, and 
above all with such absolute integrity and en- 
tire devotion to the Government's interests. 

Not only does the Treasury Department 
handle, in the ordinary income and expen- 
ditures, cash transactions aggregating more 
than a billion dollars annually, but it is re- 
sponsible for the custodianship and the re- 
newal of currency, the printing of paper 
money, the coinage of specie, and the hand- 
ling of public securities, and the figures on 
both sides of the ledger representing the total 
of all these transactions reach the incompre- 
hensible aggregate of three and a half 
billions. 

Such great sums are handled year after 
year with absolute integrity, with books that 
balance to a penny, with cash drawers that 
are never short, with a trust not betrayed. 
Whatever opinion home-coming European 
travellers may have of Treasury methods, 
after more or less successful attempts to 
avoid customs regulations, they must, on the 
whole, give respect to an organization which 
accepts a responsibility for annual financial 
transactions aggregating $3,500,000,000, and 

535 



Business and Education 

has discharged that responsibihty year after 
year, under one pohtical administration after 
another, through the vicissitudes of cabinet 
changes, and presents a clean record haA'ing 
on it no important blot of a betrayal of a 
trust. 

A new Secretary of the Treasury ap- 
proaching the responsibilities and duties of 
the great position with an appreciation of 
their importance must, in years past, haA'e 
been greatly surprised to find how little time 
apparently he could devote to the consider- 
ation of great national questions, and how 
much he must give to the small routine de- 
tails of the administration of the civil ser- 
vice. The 26,000 employees under the 
direction of the Secretary of the Treasury 
make the Treasury Department only second 
to the Post-Office in point of numbers. 
AMien the civil-service blanket was only 
partly draAvn over these places, the time 
which the head of the Department was 
forced to give to the discussion of appoint- 
ments, matters in most part of minor con- 
sequence so far as the efficiency of admin- 
istration was concerned, was something that 
must have discouraged more than one sec- 
retary. AMiile such appointments may have 
been of minor consequence in the actual ad- 
ministration of the Department, they Avere 
of great importance if regard was to be had 
536 



The Treasury 

for maintaining cordial relations with the 
legislative branch of the Government. 

Washington wishes to see evidence of 
democracy about the Departments. Neither 
Senator nor Congressman is satisfied to cool 
his heels in an anteroom for any length of 
time, nor are political leaders who come to 
the Capitol on a mission likely to be pleased 
if the Secretary's engagements are such that 
an appointment cannot be made without no- 
tice or delay. So it came about that a busi- 
ness day in the Secretary's office was, in 
times past, almost wholly given up, during 
the periods in which Congress was in ses- 
sion, to the reception of visitors, and most 
of these visitors came to discuss matters of 
small consequence to the administration of 
the Department. The Secretary of this 
great Department must give heed to innu- 
merable trifles such as would never reach the 
head of even a comparatively small business 
organization. Requests come from people of 
importance, and they must be taken up with 
the care which the position of such persons 
demands rather than with any thought of 
their importance in relation to the adminis- 
tration of departmental affairs. 

There is vast improvement in the Treas- 
ury Department in this respect compared 
with former conditions. The Secretary now 
has power to make but few appointments 
537 



Business and Education 

outside the classified service, and by recent 
executive order he may not consider outside 
recommendations in regard to promotions 
in the classified service. 

Early in the administration of Secretary 
Gage it was recognized by the Secretary 
that, if he was to give consideration to the 
unusual number of important public ques- 
tions which were pressing, he must be re- 
lieved of much of the detail of the admin- 
istration of the civil service ; so he delegated 
to a committee, consisting of an Assistant 
Secretary, the Chief Clerk, and the Appoint- 
ment Clerk, consideration of all questions 
of civil-service administration affecting the 
employees in Washington. This plan con- 
tinues in force. Political considerations have 
always been absolutely excluded from the 
deliberations of this committee. I can speak 
for that positively, and I mean to say that 
such a statement is literally true. The com- 
mittee has considered many thousands of 
promotions and changes in the classified ser- 
vice, and there has been no more discussion 
of politics than would be found in the con- 
sideration of promotions in a great banking 
or insurance institution. The recommenda- 
tions of heads of bureaus, the length and 
character of service, the regularity of at- 
tendance, and the results of examinations 
which are made to cover both academic 
538 



The Treasury 

and practical qualifications, are the factors 
taken into consideration. So far is political 
influence eliminated, indeed so far as pro- 
motions governed strictly by merit may be 
considered the goal in an ideal civil-service 
administration, I believe the conduct of the 
civil service in the Treasury Department is 
to-day practically all that could be asked. 

There are many difficult problems in the 
civil-service administration, and one of the 
hardest of solution is what to do with su- 
perannuated clerks. Congress is distinctly 
opposed to anything like a civil pension ; but, 
on the other hand. Congressmen and Sen- 
ators will individually take up the cudgels 
most vigorously in behalf of any clerk who 
after years of satisfactory service and regu- 
lar promotions may be reduced because of 
declining efficiency. The result is that not 
infrequently young men on small salaries 
are doing much better work, and certainly 
far more in quantity, than are older clerks 
drawing higher pay. The situation is such 
at the present time that the most serious 
obstacles lie in the way of a strictly merit 
system. 

An attempt was made a few years ago to 
organize in the Treasury Department what 
was euphoniously called an " Honor Roll," 
and to reduce to the nine-hundred-dollar- 
grade clerks who had passed seventy years 

539 



Business and Education 

of age. Such clerks were to be placed on 
this " Honor Roll," which was to be, in 
some respects, a pension roll, although all 
such clerks were expected to be at their desks 
regularly. Congress frowned upon the plan, 
and it has never been put into complete oper- 
ation. Something of the sort will be abso- 
lutely necessary, however, when the full 
effect of the protection of the present civil- 
service rules becomes manifest in a con- 
stantly increasing ratio of old employees. 

Any one who has had experience in the 
administration of civil service must have 
come to appreciate in the highest degree 
the protection and relief which the civil- 
service rules give to those charged with the 
responsibility for appointments and promo- 
tions ; but there are plainly two sides to 
civil-service reform. The fetich which the 
civil-service reformer worships, in its prac- 
tical application, comes very far from pro- 
viding a system which will build up the 
best sort of a working staff. That will be 
more and more plainly evidenced as the 
result of the present complete classification 
of the service works out. I shall be surprised 
if there are not marked modifications which 
will give to the head of the Department, 
always after satisfactory academic tests have 
been applied, far greater freedom of selec- 
tion and appointment than exists at present. 
540 



The Treasury 

The practical operation of civil-service 
rules results in taking clerks into the service 
at only the lov^est grades, usually the grades 
paying $660 or $720 a year. It is true the 
rules permit the appointment of persons to 
the higher positions ; but, as a practical mat- 
ter, certifications for new appointments are 
almost always asked for to fill only the lower 
grades, while vacancies in the higher grades 
are filled by the promotion of those em- 
ployees who are personally known to the 
heads of the bureaus. The result is that the 
whole service is being fed from a class of 
people willing to accept these small salaries, 
whose only known qualifications are very 
moderate academic achievements. The 
people taking these examinations seem to be 
largely those who have been unsuccessful in 
satisfactorily locating themselves in the busi- 
ness world. They have some education, to 
be sure, but in a great many cases they lack 
those qualities which make for commercial 
success. They have drifted into dissatisfac- 
tion with commercial conditions, and are 
glad to seek a harbor in a routine Govern- 
ment clerkship. Rarely is there found 
among the class successfully passing these 
examinations the sort of material which will 
develop good executive ability. Executive 
ability is something that is difficult to demon- 
strate through the medium of a competitive 
541 



Business and Education 

academic examination. The Civil Service 
Commission has found no way to measure 
the personal equation, and the personal equa- 
tion counts for much more than does the 
mere fact of certain moderate academic 
training. 

In the last few years there have been in 
the Treasury Department two unusual op- 
portunities to make comparison of the quali- 
fications of clerks appointed outside of civil- 
service regulations with those appointed in 
the regular way. After the breaking out of 
the Spanish War work in the auditing bu- 
reaus of the Department increased so rapidly 
that a large number of emergency clerkships 
was created, and Congress specifically pro- 
vided that these should be filled without ref- 
erence to civil-service rules. In spite of this 
special exemption, not one of the places was 
filled without the candidate first passing a 
satisfactory academic examination under the 
direction of the Treasury Department offi- 
cials. Those charged with the appointments, 
however, had perfect freedom to weigh the 
personal equation, in the language of the 
day '' to size up the man," and, while aca- 
demic qualifications were insisted upon, 
personal characteristics were given much 
weight. I believe there is no one intimately 
familiar with the Treasury Department who 
will deny that the clerks so appointed are, 
542 



The Treasury 

as a body, distinctly superior to those drawn 
through the regular channels of the civil- 
service commission. 

The other incident was the execution of 
the great detail connected with the popular 
issue of $200,000,000 of Spanish War Loan 
bonds. The bonds were subscribed for by 
325,000 investors. The volume of the work 
compelled the Department to employ a spe- 
cial corps of 600 clerks, all of whom were 
engaged without reference to civil-service 
regulations. There is no question as to the 
general superiority of the clerks so appointed 
when compared with the average regular 
clerks working beside them. They may have 
lacked some of the experience of the older 
employees, but their youth and adaptability 
made them far quicker to grasp the condi- 
tions of a new problem, more dexterous in 
the execution of the work, and distinctly 
more satisfactory from almost every point 
of view. 

Something less than ideally efficient ad- 
ministration may well be granted, however, 
in order that the head of the Department 
may have some relief from Congressional 
pressure in regard to minor appointments. 
That has been accomplished and the country 
is unquestionably the gainer to a great de- 
gree, because the Secretary had been given 
time for the consideration of those questions 

543 



Business and Education 

which are of vastly more importance than 
are the routine details of the administration 
of the personnel. 

In this connection a word in regard to 
political pressure may be of interest. A 
great deal is heard about the demands of 
the politicians for places — a great deal 
more is heard of such demands in the ad- 
dresses of civil-service reformers than is 
heard in the office of the Secretary. It may 
be a surprising statement, but it is an actual 
fact, that, in the requests for appointments, 
the claim for political recognition is a com- 
paratively rare one. It is not politics, but 
sympathy and charity, that moves the aver- 
age Congressman to visit the Departments 
and plead for places. In nine cases out of 
ten. their requests may be debited to pure 
kindheartedness rather than to political 
machinations. 

]\Iost of the men who have been cartooned 
into the public mind as typical party spoils- 
men are. as a matter of fact, modest in their 
requests and aliAX to the need for good ad- 
ministration of the service. As a rule, the 
most imperious requests come from neAvly 
elected Congressmen representing unheard- - 
of districts, who have not yet adjusted them- 
selves to the situation, and who believe that 
the rights and perquisites of a member of 
Cono;ress have little limit. The best known 
544 



The Treasury 

of the great political leaders are not likely 
to make requests that ought not to be 
granted, and are generally quick to appre- 
ciate good reasons, if any exist, why they 
cannot have what they ask for. It is an 
interesting fact that some of the most incon- 
siderate demands for promotions in classi- 
fied places come from members of the Senate 
and House who publicly pose as leaders 
of the civil-service reform movement, while 
the most prominent of the political leaders 
can almost always be counted upon to be 
reasonable in their demands and to accept 
cheerfully a situation which prevents their 
wishes being met. 

A notable difference between the position 
of the Secretary of the Treasury and that of 
the head of a great business organization is 
the time which the Secretary must devote 
to the discussion of public questions with 
newspaper representatives. No small part 
of his success will depend upon his adapta- 
bility to that new condition, for the view 
which most of the people of the country will 
form of his administration will naturally be 
much colored by the attitude of the news- 
paper correspondents through whom the 
public is informed regarding official matters. 

Newspaper conditions in Washington are 
unlike those in other cities. There are in- 
numerable representatives of papers, cover- 
35 545 



Business and Education 

ing the whole range of the country, each 
one of whom serves a constituency of great 
importance. As a body, the newspaper cor- 
respondents of Washington are incompar- 
ably superior to the average newspaper rep- 
resentatives in other cities. Many of them 
have been intelligent observers of public 
affairs for a generation, and have been the 
confidants and advisers of many Cabinet 
officers. There is hardly an important news- 
paper man in Washington who is not at times 
the trusted custodian of state secrets, and 
the relation of these men to public affairs is 
entirely different from the relation of the 
average reporter in other cities to the busi- 
ness questions of local interest. It is im- 
portant that the Secretary of the Treasury 
recognize this, for the Treasury Department 
is one of the chief sources of news at the 
Capital, and that he should learn to meet 
fairly and frankly the newspaper correspon- 
dents. This requires much time, much tact, 
and a discrimination in determining those 
who can be fully trusted and kept confiden- 
tially informed of the progress of affairs, 
and those who must be talked to with 
guarded politeness. 

The sacrifice of time is by no means with- 
out its recompense. Many a cabinet officer 
has received quite as good counsel from 
conservative and experienced newspaper cor- 
546 



The Treasury 

respondents as he could get from members 
of Senate or House. This confidential rela- 
tion with newspaper representatives is 
unique, and unless a Secretary of the Treas- 
ury has been trained in the official atmos- 
phere of Washington, it is likely to take 
him some time to recognize it and adjust 
himself to the condition. 

In a most important particular the Treas- 
ury Department differs from the Finance 
Ministries of other countries. Elsewhere the 
Finance Minister occupies an authoritative 
relation to legislation affecting income and 
expenditure. With us, the Government has 
always gone on with the most happy-go- 
lucky lack of co-ordination between legis- 
lation affecting income and legislation affect- 
ing expenditure. The Finance Ministers 
of other countries draw up a budget, which 
forms the basis of Parliamentary legis- 
lation in financial matters. They make 
careful estimate of probable Government in- 
come and of the demands for the executive 
administration, and Parliament, as an almost 
pro forma matter, passes legislation affecting 
taxation which will conform to the proposals 
in the budget, and limits appropriations 
within lines which the budget may prescribe. 

With us, however, the Secretary of the 
Treasury is little more than an agent who, 
without comment, transmits to Congress 
547 



Business and Education 

from the heads of the various Departments 
their estimates regarding appropriations. 
Congress, in turn, does not pay close heed 
to these estimates, frequently declining to 
make appropriations asked for, and not in- 
frequently making appropriations which the 
executiA^e head of the Department has de- 
clared are not needed. 

With us there is little flexibility on the 
income side of the great public ledger. The 
Secretary of the Treasury may make gen- 
eral recommendations regarding the neces- 
sities for greater income or the opportunity 
for decreasing taxation, but Congress does 
not look to the head of the Treasury Depart- 
ment with much solicitude for advice regard- 
ing tax legislation or suggestions concerning 
conservative limits of appropriations. The 
sources of our Government income are so 
intimately bound up with the economic 
theory of protection that we are likely to 
formulate our tax laAvs with little or no re- 
gard to the amount of income they Avill pro- 
duce, and to make appropriations on as 
liberal a scale as the income Avill permit, and 
the Finance ^Minister has little if any re- 
sponsibility either for a cash balance or a 
Treasury deficit. 

Congress is not disposed, either, to give 
A'Cry much heed to Departmental recommen- 
dations regarding expenditures. 
548 



The Treasury 

For many years, for example, every Sec- 
retary of the Treasury, in each of his annual 
messages to Congress, recommended that no 
appropriation be made for maintaining cer- 
tain customs districts which have become 
commercially obsolete, and which are main- 
tained apparently for no other purpose than 
to give the Senator or Congressman most 
concerned an opportunity to recommend a 
presidential appointment. There are 12 
customs districts, which are officered at an 
expense of $15,578.14, where the total in- 
come from customs in a single year was 
only $275.26, and the cost of collection, 
therefore, reaches $56.59, for each dollar 
collected. In spite of repeated recommen- 
dations that we accept the changed condi- 
tions which have made these old-time cus- 
toms districts quite deserted by commerce, 
Congress insists year after year that they 
shall be maintained, that officers shall be 
appointed, and the expenses of salaries and 
office administration appropriated. 

One illustration is that of a port equipped 
with a collector at a salary of $1800, and 
separated from a large city and an active 
customs district by only a river bridged and 
easily crossed. The total collections in a 
recent year at this port were twenty cents, 
but the United States Senator who con- 
trolled the appointment insisted, when a 
549 



Business and Education 

vacancy occurred, that a new appointment of 
a collector be made, and Congress refused to 
act upon the many recommendations for 
the abolition of this and other useless ports. 
A saving of $200,000 a year could easily be 
made without any sacrifice of efficiency in 
the customs service, but Congress hesitates 
to give up the privilege of naming the ap- 
pointees who are to receive in salaries this 
$200,000 of useless expenditure. 

There are other illustrations of what 
seems to be almost a spirit of perverseness 
on the part of Congress in failures to accept 
recommendations for reductions in expendi- 
tures which Treasury officials have for years 
believed could w^ell be made, while on the 
other hand it is equally difficult sometimes 
to secure trifling appropriations for greatly 
needed requisites. There is an assay office 
in a large city in the Aliddle West, for ex- 
ample, where the Government pays out five 
dollars in salaries for every hundred dollars 
of gold which is received, but Congress in- 
sists on making unasked appropriations for 
its maintenance. It sometimes seems as if 
there were settled antagonism in appropria- 
tion committees toward the recommenda- 
tions coming from the heads of depart- 
ments. Serious recommendations made after 
thorough study of a subject are not always 
received in a spirit of confidence by the ap- 

550 



The Treasury 

propriation committees, and the difficulties 
of executive administration are, in conse- 
quence, greatly increased. 

Sometimes this apparent spirit of per- 
verseness goes farther and actively puts ob- 
stacles in the way of administration. An 
illustration of that is found in recent efforts 
to introduce improved methods into the 
Bureau of Engraving and Printing. The 
Government printing of currency is done 
upon the same form of old-fashioned hand- 
press that was used when the first greenback 
and the first national bank note were turned 
out. The process is slow and expensive. 
The growth of the country created a demand 
upon the Bureau which it was almost impos- 
sible to keep pace with, and so it was decided 
to put in power presses to print the backs 
of notes. An expenditure of $25,000 was 
made, with results so economical that a sav- 
ing of the whole cost of the machines was 
effected in a few months. Tests were made 
by mixing hand-printed and machine- 
printed bills and submitting them, unmarked, 
to numbers of expert money counters; and 
invariably the machine-printed bills would 
be selected as the best examples of plate 
printing. 

Labor organizations were opposed to this 
introduction of power presses, however, and 
when Congress convened brought active 

551 



Business and Education 

pressure to bear at the Capital, with the 
result that riders were tacked upon the ap- 
propriation bills prohibiting the expenditure 
of any appropriation for the maintenance of 
power presses ; and this was done without 
any communication with the Secretary of 
the Treasury on the part of either Senate or 
House committee, without any opportunity 
for presenting the Treasury's side of the 
matter, and without any effort to secure in- 
formation as a basis for intelligent legisla- 
tion except such as was presented by labor 
leaders who were not even in the employ of 
the Government. 

The Ways and Means Committee and 
the Appropriation Committees of Congress 
take upon themselves the responsibility for 
adjusting the relation between income and 
expenditure. A great tariff bill may be 
framed with little more than nominal ref- 
erence to the Treasury Department, and 
legislation formulated which may enor- 
mously affect one side or the other of the 
Treasury accounts without the voice of the 
Secretary being heard or his advice asked 
for. Income is provided and expenditures 
are appropriated, without Congress being 
advised by the head of the Treasury as to 
the balance between the two sides of the 
budget. 

A phase of Treasury affairs emphasized 
552 



The Treasury 

in the public mind is the relation of the 
Treasury to the money market. At certain 
seasons much is to be heard about the cries 
of Wall Street for Treasury help, and of the 
relief measures which the Secretary of the 
Treasury may bring to bear upon an un- 
satisfactory banking position. An ideal fis- 
cal situation for the Government, President 
Harrison once said, would be one in which 
the income each day just equalled the ex- 
penditures. In such a situation there would 
be no problem regarding the relation of the 
Treasury to the money market. So long as 
we must work with our present Sub-treasury 
system, however, founded as it was in igno- 
rance and suspicion of proper banking func- 
tions, we must periodically face a situation 
in which the operations of the Treasury are 
of great import in the general financial sit- 
uation. Laws which have been allowed to 
stand unchanged since Jackson's hatred of 
the banks was crystallized into statute, pre- 
vent the deposits of the receipts from cus- 
toms anywhere but in the actual vaults of 
the Treasury or Sub-treasury. The country 
is in such a position as a great business firm 
would be whose receipts at times enormously 
exceeded its expenditures, if it should decide 
to lock up its daily income in safety deposit 
vaults, turning all credits into cash and lock- 
ing up the actual currency just at a time 

553 



Business and Education 

when there might be a most active demand 
in the ordinary channels of trade for the 
currency which would thus be abstracted. 

Of course, it is impossible to have such 
an ideal situation as President Harrison 
suggested; so long as the laws relating to 
the Sub-treasury system stand unchanged it 
is useless to talk about taking the Govern- 
ment out of the banking business. The oper- 
ations of the Treasury inevitably draw it 
into the situation, and it becomes one of the 
great problems of the Secretary to keep, as 
nearly as may be, an unchanging total of 
currency in the Treasury vaults, and neither 
withdraw from the circulating medium in 
active use great quantities of currency when 
income is excessive nor suddenly add to the 
currency in circulation when the Government 
has great payments to make in excess of its 
daily income. The problems of that char- 
acter were unusually frequent and difficult 
during Secretary Gage's administration. 
The successful settlement of the Pacific Rail- 
road indebtedness brought a payment of 
$58,000,000 to the Treasury in December, 
1897, just at a period of most active com- 
mercial demand and when the withdrawal 
of so much currency would have been dis- 
astrous to reviving business. A few months 
later came the sudden expenditures result- 
ing from the $50,000,000 appropriation 
554 



The Treasury 

made by Congress at the beginning of the 
Spanish War, and soon after that were 
poured into the Treasury the proceeds of 
$200,000,000 of Spanish War Bonds. Twice 
during the administration issues of Govern- 
ment bonds matured, and payment of many 
milHons had to be made on that account. 
This period was the most remarkable since 
the Civil War for violent fluctuations in the 
Treasury's balance, and it is one of the best 
evidences of genius in the administration of 
the Department at that time that the stock 
of money actually in the Treasury vaults, 
in spite of this period of irregular income 
and expenditure, was always kept at com- 
paratively the same level, and Treasury oper- 
ations were not permitted seriously to affect 
the currency of the country. 

It is such problems as these which a Sec- 
retary of the Treasury must always find re- 
curring, so long as our present Sub-treasury 
system is maintained, and the best evidence 
of ability on the part of a Secretary is that 
these sudden influxes of funds or exceptional 
expenditures are handled so that the public 
has no reason to recognize the intimate re- 
lation which must exist under present con- 
ditions between the Treasury and the bank- 
ing situation. 

With a currency system which has largely 
been the growth of exigency rather than of 

555 



Business and Education 

forethought, there is always a desire for leg- 
islation which will bring the country's cur- 
rency into line with sound economic prin- 
ciples. Both the country and Congress have 
come to look to the head of the Treasury 
Department as a natural source for sugges- 
tions regarding needed currency and bank- 
ing legislation, and one of his most important 
duties is the preparation of that portion of 
his annual report to Congress, which con- 
tains recommendations of such character. 
That has been true particularly during those 
recent years in which fundamental currency 
discussion has been so prominent in political 
affairs, and during which there has been 
formulated legislation which is an important 
part of the groundwork of our financial sys- 
tem. It requires a wide range of ability 
to pass easily from the innumerable practical 
problems of executive administration which 
the Treasury presents, to the writing of 
State papers given to theoretical and eco- 
nomic discussion of some of the subtleties of 
finance and currency. The annual reports 
of the heads of the Treasury Department 
for many years, however, show that we have 
been fortunate in having men of such breadth 
of ability that they could do this and do it 
well. 

Not only must the Secretary successfully 
grasp theoretical problems in finance and 
556 



The Treasury 

be capable of building up in his message to 
Congress sound recommendations for finan- 
cial legislation, but he has to face a much 
more trying ordeal when he is invited to 
appear before either the Senate Finance 
Committee or the House Committee on 
Banking and Currency — a thing which is 
usual whenever important financial legisla- 
tion is under consideration. It is a com- 
paratively easy matter, with ample time and 
good counsel, to evolve satisfactory recom- 
mendations for legislation, but it is far more 
difficult to advocate those recommendations 
in an inquiry by ingenious and hostile mem- 
bers of a Congressional Committee. Any 
one who has studied the proceedings of 
Senate or House Committees when prom- 
inent business men have been brought before 
them tO' express their views upon financial 
legislation must have been struck by the 
lamentable showing which some of the most 
prominent financiers may make under a fire 
of questions from keen-witted and experi- 
enced members of this committee. Men 
who are rulers in practical finance are fre- 
quently unable to hold their own in any- 
thing like creditable shape in a discussion of 
fundamental financial measures which it may 
be proposed to enact into law. 

English Cabinet Members must appear 
in Parliament to answer interpellations, but 

557 



Business and Education 

notice of the question is given the day before 
and a member of the Cabinet has ample 
time to confer and to study his answer, and 
he may even decHne for state reasons to 
make any answer, if he sees fit. Our own 
Finance Minister is put in a much more diffi- 
cult position, however, when he appears be- 
fore a Congressional Committee. He knows 
only the general line that the inquiry will 
take. If he is called before the Banking and 
Currency Committee, he faces seventeen 
members, of whom a large minority are po- 
litically hostile and who are thoroughly 
trained in the art of asking difficult ques- 
tions. His answers become a part of the 
published records, and he is placed in a posi- 
tion where, if he is to make a satisfactory 
showing, he must reply off-hand to any ques- 
tion that is propounded by any member of 
the committee. To go through such an 
ordeal with satisfaction needs thorough un- 
derstanding of the subject and readiness of 
comprehension and retort. 

The most important bureau in the Treas- 
ury Department is the one charged with 
the duty of collecting the customs. Not 
only must this bureau, in order that there 
shall be no smuggling, keep a watchful eye 
upon 15,000 miles of coast, a northern 
frontier more than three thousand miles 
long, and a southern boundary stretching 
558 



The Treasury 

the full breadth of Mexico, but it is charged 
with the administration of the most intri- 
cate tariff schedule, requiring not only fidel- 
ity and integrity where vast sums are con- 
cerned, but great expert knowledge in regard 
to commodities and the keenest intelligence 
in the application of that knowledge. The 
great work of this bureau is, of course, in 
the collection of the customs levied on regu- 
larly imported merchandise, and that work 
goes on with little criticism and without 
much friction. Another phase, the collection 
of duties on articles brought home by re- 
turning travellers, is comparatively insig- 
nificant in point of income, but to a large 
number of citizens it is the one point of con- 
tact which they have with the Department, 
and it not infrequently leaves them ready to 
condemn and upbraid. One of the difficul- 
ties in this part of the administration lies in 
the palpable fact that it is not easy to obtain 
a corps of inspectors, when Congress limits 
their salaries to four dollars a day, who will 
serve long hours at trying duties, always 
maintain their equanimity, and be courteous 
in the face of much provocation to be other- 
wise, and always retain their integrity and 
repel efforts to corrupt them made by people 
occupying positions of high standing and 
respect in the community. Under President 
McKinley's administration it was determined 

559 



Business and Education 

to make the enforcement of the law, as it 
appHed to returning travellers, much more 
rigid than had been the case, and the stricter 
enforcement which has since been in vogue 
has led to more criticism of the Treasury, 
probably, than has any other phase of its 
affairs. 

In the minds of most people a customs 
law seems to be quite unlike other laws. It 
is a statute which it is more or less of a 
credit to evade, and methods of false witness 
and bribery may be brought to bear with- 
out troubling the traveller's conscience. It 
is this peculiarity of human nature that 
makes the task extremely difficult. There 
is much complaint about the Treasury treat- 
ing returning travellers as if their word was 
not to be trusted, and submitting their bag- 
gage to search after sworn declaration has 
been made. Brief experience, from the in- 
side, with this part of the Treasury adminis- 
tration will convince one how necessary 
such an attitude is. As an illustration of 
that statement, the case might be cited of 
fifteen prominent citizens of New York City 
who went abroad two or three years ago, 
and, on their return, all submitted sworn 
statements in regard to the contents of their 
trunks. Twelve declared they had no duti- 
able articles, and the remaining three paid 
an aggregate of $538. The next year the 
560 



The Treasury 

same fifteen citizens made their annual 
European pilgrimage and, on their return, 
were met by the stricter administration of 
the same law. In addition to their sworn 
declaration their baggage was carefully ex- 
amined, with a result that they paid over 
$34,000 of duty. Is it small wonder that, 
after endless experiences, of which the fore- 
going is but an average illustration, a strict- 
ness of inspection should be put in force 
which is galling to men who have both honor 
and good memories and make out correct 
schedules of their purchases when they give 
their sworn declaration tO' a customs in- 
spector ? 

In the administration of the customs 
there have undoubtedly been men who were 
not true to their oath of office and have 
accepted bribes. A considerable number of 
inspectors have at one time or another been 
summarily dealt with for such offence. In 
the handling of the vast sums of money 
which are a part of the Treasury's opera- 
tions, there have, in very rare cases, been 
instances of petty pilfering. Taken by and 
large, however, the Treasury Department is 
a splendid great commercial machine, admin- 
istered with an integrity reaching all the way 
from the head of the Department through 
the whole army of its thousands of sub- 
ordinates, an integrity of which the country 
36 561 



Business and Education 

may well be proud. Everywhere in the ad- 
ministration 'the interests of the Govern- 
ment are paramount to all else. 

The good faith and integrity of admin- 
istration may meet with assault from politi- 
cal pressure; there may be men who seek 
by bribery to influence political action ; there 
may be brought to bear all the wiles and in- 
genious methods which great pecuniary in- 
terests can evolve, but the Treasury with- 
stands such assaults and is a clean, upright, 
honestly administered organization, with the 
interests of the Government always fore- 
most. No one can become intimately fa- 
miliar with its operation without respect for 
its integrity. There are men in the organ- 
ization whose names never reach the public, 
but whose careers have been models of effi- 
ciency, intelligence, and probity. Some of 
those names it is an honor to mention, for 
the men have, with small compensation, 
given to the Department years of service of 
a character which has made success com- 
paratively easy to a long line of Secretaries, 
and always through one administration after 
another have given devoted service to the 
Department and its changing head. Such 
men are A. T. Huntington, the head of the 
Loans and Currency Division, a man whose 
sound judgment has been a support to every 
Secretary for a generation; W. F. Mac- 
562 



The Treasury 

Lennan, who, as the head of the Division o£ 
Bookkeeping and Warrants, has rendered 
services of such distinguished character that 
Congress has attached extra compensation 
to this position so long as he may hold it; 
Major J. F. Meline, who, as Assistant Treas- 
urer of the United States, has most largely 
carried the responsibility for the safe cus- 
tody of the vast sums of currency in the 
Treasury vaults, and whose integrity is as 
undoubted as that of any vault the Govern- 
ment possesses ; C. N. McGroarty, who, un- 
der a succession of Registers of the Treas- 
ury, has been largely responsible for the 
conduct of that important office in a way 
to leave no doubt of the absolute accuracy 
of its work; Thomas E. Rogers, who, al- 
most since the organization of the na- 
tional banking system, has been in charge 
of the Bureau of Bank-note Redemption, and 
through whose hands have passed $2,000,- 
000,000. 

The list might be much extended. There 
are many men in the service whom it is an 
honor tO' know, men whose character, fidel- 
ity, and intelligence, massed together, make 
the great Treasury machine what it is — a 
Department of the Government of which 
the people of the United States should be 
unreservedly proud. 

The University Press, Cambridge, Mass., U. S. A. 



If99 




^- .0^ " " ° - 











^oV 




















&>- ^v 



.*■ 










. .4"- 
V^'* ^^^ 










H-^*' 
&'"\ 




w <9 ^ 



/^^'M^^'X /^''^!L>- Z'^'^M:"'^- 



•^t.. 






















♦A J. 





'o /"^-il'^L^.S ' 



\ 










c5 vA. 




^ * O « » ^^^ 

0^ oil-. •*«: 








.y 







WERT 
BOOKWNCMNC 

Grantvjile, Pa, 

Sept.-Oct 1988 

»Ve'«e Otiiliiy Bound 






"°^ 



.4^1- 






